Download THE EFFECTS OF GLOBALIZATION ON MARKETING

THE EFFECTS OF GLOBALIZATION ON MARKETING STRATEGY AND
PERFORMANCE
By
AMONRAT THOUMRUNGROJE
A dissertation submitted in partial fulfillment of
the requirements for the degree of
DOCTOR OF PHILOSOPHY
WASHINGTON STATE UNIVERSITY
College of Business and Economics
MAY 2004
© Copyright by AMONRAT THOUMRUNGROJE, 2004
All Rights Reserved
© Copyright by AMONRAT THOUMRUNGROJE, 2004
All Rights Reserved
To the Faculty of Washington State University:
The members of the Committee appointed to examine the dissertation of
AMONRAT THOUMRUNGROJE find it satisfactory and recommend that it be accepted.
______________________________
Chair
______________________________
______________________________
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ACKNOWLEDGEMENTS
This dissertation is dedicated to my parents, for whom none of my accomplishments in
life could have been achieved. Their unconditional love and unending support of my personal
endeavors has been a major factor in giving me the strength of mind to complete my Ph.D.
program.
I am very grateful to Dr. Patriya Tansuhaj, who persistently encouraged me to strive for
excellence. She taught me to think critically and to have self-discipline. As my advisor, she was
readily available and gave prompt advice during the dissertation process. I truly appreciate her
guidance, patience, and dedication throughout my doctoral study.
I am also very grateful for the assistance provided by Dr. James McCullough and Dr.
Sung K. Ahn, my dissertation committee members. Dr. McCullough always reminded me to
address fundamental, yet very crucial issues that are often overlooked by scholars. He
emphasized the significant contributions of my work to practitioners and helped me relate the
theoretical framework to real world phenomenon. I am thankful for his input.
Dr. Ahn gave insightful comments on the methodological techniques and other important
issues in this dissertation. His feedback was immediate and he was available for me whenever I
needed help on my study and dissertation. I feel very fortunate to have had him on my
committee and really appreciate his help.
Dr. Jerman Rose from the Center for Entrepreneurial Studies taught me to be creative and
to think ‘out of the box.’ He always gave me words of encouragement and had faith in my
abilities. He instilled in me the confidence to become not only a leading scholar but also a great
teacher in my field of specialization. I am sincerely grateful for his support.
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My sincere gratitude goes to the ABAC School of Management at Assumption
University, the International Business Institute, and the Center for Entrepreneurial Studies at
Washington State University, for their financial and other supports. I would like to thank Teresa
Brewer for her administrative assistance throughout my Ph.D. program. I am indebted to my
friends and colleagues Olimpia C. Racela and Rattanawadee Puttapong; two former students,
Pattana Boonchoo and Amornrat Cheevavichawalkul; and the staffs at the ABAC School of
Management for their assistance during my data collections.
Finally and importantly, I am also thankful for the special friends I met during my time at
WSU, Ruby Lee, Kim-Heng Chen, and all the International Business Ph.D. students who gave
me tremendous emotional support.
Without the valuable contributions from these aforementioned individuals and
organizations, the completion of my doctorate degree would not have been possible. Thank you
very much!
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THE EFFECTS OF GLOBALIZATION ON MARKETING STRATEGY AND
PERFORMANCE
Abstract
by Amonrat Thoumrungroje, Ph.D.
Washington State University
May 2004
Chair: Patriya Tansuhaj
Building on international business, strategic management, and marketing literature, this
dissertation advances prior knowledge on globalization and business by analyzing different
effects of globalization on firms. Globalization—the process of increasing social, cultural,
political, and economic interdependence—has resulted in several changes in business
environment. Global market opportunities and threats are major effects of globalization. While
the former refers to the increases in market potential, trade and investment potential, and
resource accessibility, the latter refers to the increases in number and level of competition, and
the level of uncertainty. Two empirical studies included in this dissertation explore how these
effects influence firms’ international marketing activities and performance.
The first empirical study investigates the effects of globalization on firm performance.
The second study examines the role of firms’ cooperation in alliances in enhancing their
performance amid globalization by specifically focusing on co-marketing alliances and
international marketing performance of firms. Conceptual models are developed based on
environment-organization literature, transaction cost economics, and market power perspective.
Results from both empirical investigations lend support to theoretical conjectures. Specifically,
the first study found that while firm performance is enhanced by increased market opportunities
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evoked by globalization, it is also hampered by growing competitive threats. Moreover, the
second study indicates that globalization drives more collaboration in international marketing
activities among firms in co-marketing alliances, and such cooperation enables firms to enhance
their international marketing effectiveness.
Thus, central contributions of this dissertation include: first, it classifies the effects of
globalization on firms into global market opportunities and global competitive threats; second, it
integrates literature on international business, strategic management, and marketing to address
the effects of globalization on firms’ marketing conduct and outcomes; third, it demonstrates the
generalizability of the transaction cost economics, the market power perspectives, and the
literature on environment-organization interfaces in the domain of globalization; fourth, it
confirms that globalization acts as a two-edged sword and that alliance cooperation presents a
viable alternative for firms to navigate successfully in this new competitive landscape.
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TABLES OF CONTENTS
Page
ACKNOWLEDGEMENTS........................................................................................................... iii
ABSTRACT.................................................................................................................................... v
LIST OF TABLES......................................................................................................................... xi
LIST OF FIGURES ...................................................................................................................... xii
CHAPTER
1. INTRODUCTION ............................................................................................................ 1
Overview ................................................................................................................... 1
Globalization and its effects ............................................................................... 2
Globalization and business ................................................................................. 4
Globalization and marketing cooperation........................................................... 8
Developed and emerging economies as the research contexts ........................... 9
The purpose, the major research questions, and the scope of the study.................. 11
Organization of the dissertation .............................................................................. 13
2. GLOBALIZATION EFFECTS AND FIRM PERFORMANCE ................................... 15
Introduction ............................................................................................................. 15
Globalization Literature .......................................................................................... 17
Forces of globalization...................................................................................... 17
Globalization effects ......................................................................................... 17
Theoretical framework and hypotheses .................................................................. 18
Global market opportunities and firm performance ......................................... 20
Global market threats and firm performance .................................................... 21
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Research context ..................................................................................................... 24
Research method ..................................................................................................... 24
Sample .............................................................................................................. 24
Survey design and data collection .................................................................... 25
Non-response bias analysis ............................................................................... 26
Measures ........................................................................................................... 28
Measure development and validation ............................................................... 30
Results and discussion ............................................................................................ 33
Preliminary test of country effect ..................................................................... 33
Estimation ......................................................................................................... 33
Hypothesis testing............................................................................................. 35
Contributions and future directions for research..................................................... 37
Theoretical contributions and managerial implications.................................... 37
Limitations and directions for future research .................................................. 38
Conclusion .............................................................................................................. 39
3. GLOBALIZATION EFFECTS, CO-MARKETING ALLIANCES, AND
PERFORMANCE ......................................................................................................... 40
Introduction ............................................................................................................. 40
Globalization effects and firm responses.......................................................... 41
Research emphasis and research questions ............................................................. 42
Co-marketing alliances ..................................................................................... 42
Research questions............................................................................................ 45
A review of literature on alliances .......................................................................... 45
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Forms of organizational relationships............................................................... 46
Strategic alliances ............................................................................................. 47
Co-marketing alliances ..................................................................................... 48
Theoretical framework and proposed relationships ................................................ 50
Globalization effects and co-marketing alliances ............................................. 52
Transaction cost economics and market power perspective ............................. 52
Globalization market opportunities and global market threats ......................... 53
Conceptual relationships and propositions ....................................................... 54
Theoretical contributions ........................................................................................ 61
Managerial implications.......................................................................................... 63
Suggestions for future research............................................................................... 64
Conclusion .............................................................................................................. 64
4. THE EFFECTS OF GLOBALIZATION ON CO-MARKETING ALLIANCES AND
FIRM PERFORMANCE: AN EMPIRICAL STUDY.................................................. 66
Introduction ............................................................................................................. 66
A Review of literature on globalization effects and co-marketing alliances .......... 67
Globalization effects ......................................................................................... 67
Co-marketing alliances ..................................................................................... 70
Theoretical framework and hypotheses .................................................................. 71
Transaction cost economics .............................................................................. 71
Market power perspective................................................................................. 72
Model and hypotheses ...................................................................................... 73
Research context ..................................................................................................... 78
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Research method ..................................................................................................... 79
Sample .............................................................................................................. 79
Survey design and data collection .................................................................... 80
Non-response bias analysis ............................................................................... 81
Measures ........................................................................................................... 82
Measure development and validation ............................................................... 85
Results and discussion ............................................................................................ 89
Preliminary test of country effect ..................................................................... 89
Model specification........................................................................................... 90
Hypothesis testing and discussion .................................................................... 90
Contributions and future directions for research..................................................... 94
Theoretical contributions .................................................................................. 94
Managerial implications ................................................................................... 95
Limitations and directions for future research .................................................. 96
Conclusion .............................................................................................................. 97
5. CONCLUSION .............................................................................................................. 99
BIBLIOGRAPHY....................................................................................................................... 103
A. NON-RESPONSE BIAS ............................................................................................. 118
B. MEASURES ................................................................................................................ 120
C. COVER LETTER AND QUESTIONNAIRES ........................................................... 123
x
LIST OF TABLES
Page
Table 2. 1 Survey Response Rate ................................................................................................. 26
Table 2. 2 Comparison of Early and Late Responses ................................................................... 27
Table 2. 3 Comparison of Two Randomly and Equally Split Responses..................................... 28
Table 2. 4 Measures of Globalization Effects............................................................................... 29
Table 2. 5 Factor Loadings (λ), Squared Multiple Correlation (R2), Composite Reliability (ρc),
and Cronbach Alpha (α)................................................................................................ 31
Table 2. 6 Descriptive Statistics: Mean, Standard Deviation, and Correlations........................... 32
Table 2. 7 Results of Hypothesis Testing ..................................................................................... 35
Table 4. 1 Factor Loadings (λ), Squared Multiple Correlation (R2), Composite Reliability (ρc),
and Cronbach Alpha (α)............................................................................................. 87
Table 4. 2 Descriptive Statistics: Mean, Standard Deviation, and Correlations........................... 88
Table 4. 3 Results of Ordinary Least Square Regression Analysis .............................................. 91
Table 4. 4 Results of Hypothesis Testing ..................................................................................... 93
xi
LIST OF FIGURES
Page
Figure 1. 1 The Relational Exchanges in Relationship Marketing ................................................. 7
Figure 2. 1 A Model of Globalization Effects and Firm Performance ......................................... 20
Figure 2. 2 MLE Estimation for the Model .................................................................................. 34
Figure 3. 1 The Relational Exchanges in Relationship Marketing ............................................... 46
Figure 3. 2 Conceptual Model of Globalization Effects, Cooperation and Performance ............. 51
Figure 4. 1 Model of Globalization Effects, Cooperation and International Marketing
Performance ............................................................................................................... 73
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CHAPTERONE
INTRODUCTION
Overview
Globalization has caused dramatic changes to business practices around the world. Companies
such as IBM, Intel, Microsoft, and Philips have started to outsource specialists from various parts
of the world, causing job shifts and changes in companies’ structures (Engardio, Bernstein, and
Kripalani, 2003). Alliances among automakers (e.g., GM-Ford- DaimlerChrysler, Ford-Mazda,
and GM-Honda), petroleum manufacturers (e.g., BP-Mobil, NUPI-Chevron Texaco), and airlines
(e.g., star alliances) are other examples of changes driven by this phenomenon. Therefore, this
dissertation investigates the effects of globalization on business firms with a particular interest
on how it affects firms from both emerging economies (i.e., Thailand), and developed
economies, (i.e., the U.S). In this study, “globalization” refers to the process of increasing social
and cultural inter-connectedness, political interdependence, and economic, financial and market
integrations that are driven by advances in communication and transportation technologies, and
trade liberalization (Eden and Lenway, 2001; Giddens, 1990; Molle, 2002; Orozco, 2002).
The dissertation is comprised of three related studies. The first study is empirical
research designed to examine the effects of globalization on the performance of exporting firms
in Thailand and in the U.S. The second study examines the relationships between the effects of
globalization and the degree of co-marketing alliance and international marketing performance
of firms. The last study makes an empirical investigation of the effects of globalization on the
degree of co-marketing alliance and international marketing performance of firms from two
distinct economic contexts—developed and emerging economies, which are represented by
American and Thai firms, respectively. Thailand and the U.S. are appropriate research settings
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since these two countries differ greatly in their degree of globalization (Foreign Policy, 2001,
2003, 2004), level of economic development, and national competitiveness (Porter, et al., 2000;
Porter and Schwab, 2003).
While the U.S. is highly globalized, Thailand is considerably less globalized. According
to the survey conducted by AT Kearney and EDS Company in cooperation with Foreign Policy
Magazine (2004), Thailand is ranked 48th, and the U.S. is ranked 7th on the globalization index.
Thailand is classified as a lower-middle-income economy, one in which the Gross National
Income (GNI) per capita is between $736 and $2,935, while the U.S. is considered a highincome-economy whose GNI per capita is above $9,076 (The World Bank Group, 2003).
Furthermore, the national competitiveness of these two nations differs dramatically. The U.S. is
the second most competitive country in the world whereas Thailand is ranked number 40 on the
national competitiveness index (Porter and Schwab, 2003).
In this introduction, the phenomenon of globalization, including the effects of
globalization on businesses, is first described. The purpose of the study, the major research
questions, and the scope of the study are then presented. Finally, the organization of the
dissertation is provided in the last section.
Globalization and its effects
Globalization is an interesting phenomenon since it is obvious that the world has been going
through this process of change towards increasing economic, financial, social, cultural, political,
market, and environmental interdependence among nations. Virtually, everyone is affected by
this process. Given these changes, globalization brings about a borderless world (Eden and
Lenway, 2001; Ohmae, 1989a). Globalization drives people to change their ways of living,
2
prompts firms to change their ways of conducting business, and, spurs nations to establish new
national policies. Events transpiring in different parts of the world now have dramatic
consequences to other parts of the world at a faster pace than anyone could imagine in the past.
For example, the Asian financial crisis in 1997 has severely affected businesses around the world
(McLean, 2001; Woo, 2000) and the outbreak of SARS (Severe Acute Respiratory Syndrome) in
2003 has shown how globalization permits the rapid spread of the disease (Anthony, 2003;
Meredith, 2003), which affects many airlines, the hospitality industry, and other businesses
around the globe.
On the positive side, globalization enables firms to outsource and find customers around
the world, e.g., the auto and electronics industries. The globalization of production and
operations benefits firms through the realization of economies of scales and scope (Corswant,
2002; Reyes, Raisinghani, and Singh, 2002). Hence, no one can deny that globalization has
changed the way we conduct business.
Although globalization is a worldwide phenomenon, the extent to which each country is
globalized is not identical. To measure the degree of globalization of each nation, a
globalization index was recently developed by a cooperation between Foreign Policy Magazine,
AT Kearney and EDS Company (Foreign Policy, 2001, 2003). The index indicates that some
small developing countries in emerging economies such as Singapore and Malaysia were among
the top twenty most globalized nations from 2001 to 2004 with Singapore being ranked as the
most globalized nation in 2001 (AT Kearney, 2002). Thus, it is clear that globalization is an
important phenomenon, one that cannot be simply ignored, because every nation—regardless of
size or level of development—is globalized and affected by globalization. With the prevalence
of this worldwide phenomenon, it is not surprising that businesses are inevitably affected.
3
Throughout this dissertation, the effects of globalization are classified into two broad
categories: 1) global market opportunities, and 2) global market threats. These two major effects
are chosen to be investigated here because they are frequently cited in the past literature as the
most apparent and immediate effects of globalization (e.g., Fawcett, Calantone, and Smith, 1997;
Fawcett and Closs, 1993; Hafsi, 2002; Jones, 2002; Molle, 2002). Global market opportunities
refer to the increases in market potential, trade and investment potential and resource
accessibility (Contractor and Lorange, 1988; Fawcett and Closs, 1993; Jones, 2002; Levitt, 1983;
Shocker, Srivastava, and Ruekert, 1994). Global market threats refer to the increases in the
number and level of competition, and the level of uncertainty (Burgers, Hill, and Kim, 1993;
Fawcett and Closs, 1993; Jones, 2002; Ohmae, 1989a; Perlmutter and Heenan, 1986).
Globalization and business
The opportunities and threats evoked by globalization have caused firms to adapt their
organizational structures and strategies accordingly (Jones, 2002; Knight, 2000). Firms that
respond to these trends have been found to improve their performance (Knight, 2000). Although
many scholars have often discussed these two effects of globalization, a review of related
literature reveals that empirical work on such effects and business firms is still scarce
(Clougherty, 2001; Eden and Lenway, 2001; Oxley and Schnietz, 2001). Therefore, this
dissertation specifically aims at analyzing the effects of global market opportunities and threats
on 1) a firms’ overall performance, and 2) a firms’ cooperation in marketing alliances and
international marketing performance.
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Globalization and firm performance
Since the effects that global market opportunities and threats have on firm performance are
almost unexplored, the two studies included in this dissertation are designed to study the
relationships between these two effects of globalization on firms’ performance and their
international marketing cooperation and performance. On the one hand, it is suggested that
global market opportunities enable firms to access worldwide resources and expand into many
new overseas markets; thus, enhancing firm performance (Hafsi, 2002; Jones, 2002; Levitt,
1983; Shocker, Srivastava, and Ruekert, 1994). On the other hand, global market threats can be
destructive to firm performance due to an increasing number of competitors and an increase in
intensity of competition coupled with higher market uncertainty (Eng, 2001; Fawcett and Closs,
1993; Hafsi, 2002; Jones, 2002; Levitt, 1983; Sanchez, 1997).
However, no conclusion can yet be drawn on how these two aspects of globalization
effects relate to firm performance due to the absence of an empirical study that tests these
relationships. Hence, investigating the magnitude and directions of the relationships between
these two globalization effects and firm performance will help us gain a better understanding
about the directions of the effects, and determine appropriate strategies to better manage these
effects and help firms stay competitive in a globalized era.
Globalization and cooperative arrangements among firms
The fact that globalization is affecting business is undeniable since we have witnessed
remarkable changes in the business environment that have caused transformations and/or
alterations in business conduct and marketing activities of firms around the world. To achieve
superior marketing performance in the globalization era, firms need to manage relationships with
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partners, customers, and different parties in the value chain (Webster, 1992). As a result, there
has been an increasing trend towards more cooperation among firms (Evans, 2001; Hoskisson,
Hitt, and Ireland, 2004). Building on two prominent theoretical perspectives—the transaction
cost economics (Williamson, 1975, 1981) and the classical industrial organization (the market
power perspective)—cooperative arrangements such as strategic alliances offer an excellent
alternative for business firms to manage the effects of globalization and attain superior
performance. The expansion of a firm’s strategic capabilities and the reduction of competition
are two main motives for the proliferation of cooperative strategies such as strategic alliances in
today’s business environment (Burgers, Hill, and Kim, 1993; Kogut, 1988).
Types of cooperative marketing relationships
Building on the conceptualization of Morgan and Hunt (1994), strategic alliances represent one
form of lateral partnership between competitors. Figure 1.1, taken from Morgan and Hunt
(1994), illustrates the relational exchanges in relationship marketing.
The supplier and buyer partnerships (1, 2, 6 and 7) indicate vertical relationships between
a focal firm and its suppliers and/or buyers. While internal partnerships (8, 9, and 10) deal with
horizontal relationships within an organization, lateral partnerships (3, 4, and 5) are more
concerned with the focal firm’s relationships with external parties such as competitors, nonprofit organizations, and government. It is the cooperative relationships between the focal firm
and its competitors (3) that is the focus of this study.
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Figure 1. 1
The Relational Exchanges in Relationship Marketing
Supplier Partnerships
Goods
Supplier
1
Business
Units
Employees
Services
Supplier
2
10
Focal
Firm
8
Internal
Partnerships
Competitors
3
9
Functional
Departments
Lateral
Partnerships
4
Nonprofit
Organizations
5
Government
7
6
Intermediate
Customers
Ultimate
Customers
Buyer Partnerships
Source: Morgan and Hunt (1994)
Strategic alliances among competitors are of particular research interest for two main
reasons: 1) recent literature in management and marketing suggest that we have good theories on
vertical integration but not on horizontal relationships (Sheth and Sisodia, 1999), and 2) strategic
alliances among competitors comprise more than half of the total alliances formed within a
recent two-year period (Hoskisson, Hitt, and Ireland, 2004). Cooperative relationships between a
firm and its competitors can be in the form of technology alliances, co-marketing alliances,
global strategic alliances, etc. (Morgan and Hunt, 1994). In recent years, we have witnessed a
dramatic growth in the formation of such alliances (Dyer, Kale, and Singh, 2001; Ireland, Hitt,
and Vaidyanath, 2002; Lambe, Spekman, and Hunt, 2002). Previous studies also indicate that
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cross-national alliances are formed in many industries, e.g., automobile, large-scale and hightech industries, to help firms cope with competition and uncertainty brought about by
globalization (Burgers, Hill, and Kim, 1993; Jones, 2002; Shocker, Srivastava, and Ruekert,
1994; Shrader, 2001).
Globalization and marketing cooperation
Among the various types of cooperative arrangements mentioned above, co-marketing alliances
are the focus of this dissertation since they are considered a specific type of strategic alliances
whose scope is limited to marketing activities (Varadarajan and Cunningham, 1995). They
involve the coordination of one or more aspects of marketing—ranging from research and
development to production (Bucklin and Sengupta, 1993)—which are central to most types of
strategic alliances. Coordinating marketing activities to achieve superior marketing performance
in terms of sales, market share and profitability is the fundamental task of most interfirm
cooperation.
Moreover, co-marketing alliances are quite common in many industries in which staying
at the forefront or markets that require huge investments in R&D is difficult to attain (Bucklin
and Sengupta, 1993). This problem of continually maintaining cutting-edge positions in the
markets becomes even more serious given the fast pace of technological changes in the phase of
globalization such as is found in today’s business environment (Ohmae, 1989b). As a result,
there has been an increasing trend towards more marketing cooperation among competitors in
this business era (Hoskisson, Hitt, and Ireland, 2004; Webster, 1992). Nonetheless, limited
research attention has been given to these specific types of strategic alliances (Bucklin and
Sengupta, 1993; Sheth and Sisodia, 1999). Hence, an investigation of the degree of cooperation
8
in co-marketing alliances should provide more insights on how globalization drives cooperation
in international marketing activities, and how such cooperation, in turn, affects the firms’
international marketing performance.
Despite our knowledge of the presence of globalization, inadequate attempts have been
made to assess its effects on firms. In the last two decades, we have witnessed dramatic changes
in business and marketing activities, driven by a trend towards more interdependence among
nations. These changes demonstrate the significant impact that globalization has on businesses,
and thus calls for the need to study this topic. Since marketing is a “context-driven” discipline
(Sheth and Sisodia, 1999), an investigation of globalization effects—as one of the contextual
factors surrounding marketing activities—proves to be worthwhile.
Developed and emerging economies as the research contexts
Amid globalization where dramatic changes in opportunities and threats are pervasive, a firms’
need to respond quickly and flexibly to its environment has significantly stimulated the
development of alliances in both developed and emerging economies (Buckley and Casson,
1997; Spekman and Sawhney, 1990; Webster, 1992). Emerging economies are defined as “lowincome, rapid-growth countries using economic liberalization as their primary engine of growth”
(Hoskisson et al., 2000, 249). To be considered ‘emerging,’ a country must possess two
properties: 1) have a rapid pace of economic development, and 2) be in the process of a freemarket system (Arnold and Quelch, 1998). Hoskisson et al. (2000) further classify emerging
economies into two groups: 1) developing countries and 2) transition economies.
Emerging-economy firms are those that were originally located in the emerging
economies. These firms are interesting to study for several reasons. First, most studies of
9
emerging economies have been devoted to explaining how firms from developed economies can
expand and be successful in emerging economies, yet little is known about how firms from
emerging economies can succeed in the international marketplace. Second, these firms have
increased their presence and participation in the world market in recent years (Aulakh, Kotabe,
and Teegen, 2000; Craig and Douglas, 1997). The success of emerging-economy firms,
especially those from Korea, Taiwan, and Singapore, has been well recognized and documented
(Aulakh, Kotabe, and Teegen, 2000; Craig and Douglas, 1997; Song, Montoya-Weiss, and
Schmidt, 1997). Examples of emerging-economy firms that have gained global success include
Samsung and Lucky Goldstar from Korea (Craig and Douglas, 1997), Acer Group and Mitac
from Taiwan (Hung, 2002), Creative Technology from Singapore (Cunningham, 1995), and
Infosys Technologies from India (Business Week, 2000). Third, some strategies that work well
for firms from developed economies may not be perfectly replicated to firms from emerging
economies. Moreover, such strategies may not provide firms with the same successes due to the
unique characteristics of both the emerging economies and the firms per se (Craig and Douglas,
1997; Khanna and Rivkin, 2001).
Emerging-economy firms are usually different from developed-economy firms in various
ways. On average, the former are usually relatively young with limited foreign and marketoriented experiences (Hitt, et al., 2000), lacking managerial, financial and technological skills
(Aulakh, Kotabe, and Teegen, 2000; Hitt, et al., 2000), and possessing negative brand and
country-of-origin images (Aulakh, Kotabe, and Teegen, 2000). Moreover, some of them are
newly privatized with limited resource endowments (De Castro and Uhlenbruck, 1997), and
typically are smaller in size than the latter.
10
Provided the aforementioned distinct characteristics of firms from emerging economies,
it is interesting to study how globalization affects such firms, and whether these effects are
similar to or different from those of firms in developed markets. In addition, since the majority
of research in business disciplines merely focuses on firms in developed nations with little
interest in emerging-economy firms, the study of firms in an emerging-economy context should
also fill this gap in the literature and thus provide avenues for future research.
The purpose, the major research questions, and the scope of the study
The primary objective of this research is to gain a better understanding of the effects of
globalization on firms’ international marketing cooperation and performance of firms, both in
developed and emerging economies (i.e., the U.S. and Thailand, respectively). The first two
research questions of this dissertation are: 1) Does globalization affect firm performance? and 2)
Is the relationship between global market opportunities and performance stronger than the
relationship between global market threats and performance? By answering these research
questions, the first study of this dissertation uses data collected from firms in the U.S. and
Thailand. The study indicates the extent to which firms in two different economic contexts are
affected by globalization. It also shows which dimension of globalization effects tends to have
stronger impact on the performance of firms that are located in very different market
environments.
Another related emphasis of this dissertation is on how the degree of cooperation in comarketing alliances enables firms to manage globalization effects and stay competitive in
international markets. As suggested in past literature, globalization makes alliances an essential
part of a firm’s strategy in order to stay competitive and to achieve superior performance
11
(Ohmae, 1989a; Sheth and Sisodia, 1999; Spekman and Sawhney, 1990; Webster, 1992). To
better capture global opportunities, firms tend to cooperate with other firms to capitalize on and
leverage their limited resources (Adler, 1966; Robson and Dunk, 1999; Varadarajan and
Rajaratnam, 1986) since it is impossible for one firm to “do it all and go it alone” (Ohmae,
1989b). Similarly, in order to cope with increasing global competitive threats, firms are likely to
form alliances (Gulati, 1998; Ireland, Hitt, and Vaidyanath, 2002; Rindfleisch and Moorman,
2001; Sheth and Sisodia, 1999; Spekman and Sawhney, 1990). Based on the classical industrial
organization perspective—the market power (Burgers, Hill, and Kim, 1993; Kogut, 1988)—
firms form alliances to reduce competition and uncertainty. Through such cooperation,
companies gain market power that helps alleviate competition and improve its competitive
position (Gulati, 1998; Kale, Dyer, and Singh, 2002).
Therefore, the next two research questions of this dissertation are: 1) Does globalization
affect the degree of cooperation in co-marketing alliances? and 2) Do co-marketing alliances
influence firms’ international performance? Guided by these two broad research questions, a
more specific emphasis of this paper is on the degree of cooperation in international marketing
activities of the co-marketing alliances among firms.
Past literature also suggests that firms from emerging economies usually possess
characteristics which distinguish them from those of developed economies (Arnold and Quelch,
1998; De Castro and Uhlenbruck, 1997; Hitt, et al., 2000; Luthans, Patrick, and Luthans, 1995).
Therefore, empirical investigations on the relationships among globalization effects, degree of
co-marketing alliances, and performance of firms from Thailand and the U.S., which possess
different backgrounds and characteristics, are undertaken by a primary data approach. The data
collection using survey technique is thus used.
12
Organization of the dissertation
This dissertation consists of three manuscripts, and it is organized as follows:
Chapter One presents the general phenomenon of interest, demonstrates the value of the
study, and summarizes the topic of the study.
Chapter Two is an empirical study designed to investigate the effects of globalization on
the performance of firms from two distinct market contexts—Thailand and the U.S. Research
questions, a conceptual model, and researcg hypotheses are presented. Then, the cross-cultural
research technique, the results of the study and major research findings are discussed. This
chapter ends with theoretical contributions, managerial implications, limitations of the study, and
directions for future research.
Chapter Three presents a conceptual paper proposing an examination of the relationships
among globalization effects, degree of co-marketing alliance, and international marketing
performance of firms from emerging economies. A review of related literature on globalization
and alliances is provided. Theoretical underpinnings are discussed, a conceptual model is
presented, and research hypotheses are developed.
Chapter Four empirically tests the proposed relationships among globalization effects,
degree of co-marketing alliance and performance of firms in two distinct economic settings—
Thailand, and the U.S. Next, the cross-cultural research method is described, and results of the
study and major research findings are presented and discussed. Finally, the theoretical
contributions, managerial implications, limitations of the study, and possible extension of the
research are provided.
13
Chapter Five concludes with major findings, theoretical contributions, managerial
implications and limitations of the studies included in this dissertation. Potential avenues for
future research are also presented.
14
CHAPTER TWO
GLOBALIZATION EFFECTS AND FIRM PERFORMANCE
Introduction
In the past two decades, the world has gone through the process of globalization, one that causes
increasing economic, financial, social, cultural, political, market, and environmental
interdependence among nations. Business, as well, is inevitably affected by this process of
change towards more interdependence. Many forms of organizational restructuring (such as
downsizing, reengineering, implementation of cooperative strategies) have been witnessed as
responses to globalization (Jones, 2002). Yet, limited empirical studies have been conducted to
investigate how globalization actually affects firms. International business scholars (e.g., Clark
and Knowles, 2003; Clougherty, 2001; Eden and Lenway, 2001; Young, 2001) point out the
need to explore further the effects of globalization on firms. Therefore, we aim to investigate the
effects of globalization on firm performance.
In this study, globalization is defined as the process of increasing social and cultural
inter-connectedness, political interdependence, and economic, financial and market integrations
(Eden and Lenway, 2001; Giddens, 1990; Molle, 2002; Orozco, 2002). Although much
descriptive and theoretical literature is published on the impact of globalization, very little
empirical work exists that tests globalization effects. A few exceptions of empirical studies
examining the impact of globalization include, for example, Clougherty (2001), and Oxley and
Schnietz (2001). While Clougherty’s (2001) study is related to industry-level variables (i.e.,
domestic competition policy in the airline industry), the study conducted by Oxley and Schnietz
(2001) is more focused on firm-level variables by relating globalization to firm performance. At
the macro level, globalization is found to undermine autonomy in domestic airline competition
15
policy (Clougherty, 2001). At the micro level, globalization (operationalized as trade
liberalization) is found to improve the performance of U.S. multinational enterprises (Oxley and
Schnietz, 2001). From these two studies, we have learned that globalization is a multi-faceted
construct. Therefore, the classification of its effects into different dimensions and the study of
their impact on firms prove to be worthwhile.
Based on the aforementioned discussion, the purpose of this study is twofold. We aim to
classify and define the effects of globalization based on a review of globalization-related
literature. Furthermore, we operationalize such effects and conduct an empirical test on the
relationships between each of the key globalization effects and the performance of exporting
firms in two distinct economic contexts, the developed markets (the U.S.) and the emerging
markets (Thailand). Hence, this research attempts to answer two research questions: 1) Does
globalization affect firm performance? and 2) Is the relationship between global market
opportunities and performance stronger than the relationship between global market threats and
performance?
This paper is organized as follows. We first review the literature on globalization effects,
and define global market opportunities and global market threats. We then discuss the
theoretical frameworks underlying this study and the hypotheses. The two research contexts of
the study (i.e., the developed and emerging markets) are then described. The next section
discusses the research method and presents the results of the study. The research contributions
and conclusions are provided in the last section of the paper.
16
Globalization Literature
Forces of globalization
According to Harvey and Novicevic (2002), various factors that drive increasing globalization
can be grouped under four broad categories: 1) Macro-economic factors, 2) political factors, 3)
technological factors, and 4) organizational factors. Macro-economic factors include, for
example, an acceleration of technology transfer among countries and a rapid increase in
populations in emerging economies (Harvey and Novicevic, 2002; Manardo, 1991). Political
factors refer to privatization, deregulation and trade liberalization of many nations in favor of
free flows of trade and investments (Eden and Lenway, 2001; Hafsi, 2002). Technological
forces such as advance development in communication and transportation technologies, which
promote growth in international business transactions, are also key drivers of rapid globalization
(Graham, 1996; Knight, 2000).
Organizations such as multinational enterprises are another major agent of this process
(Eden and Lenway, 2001; Harvey and Novicevic, 2002). Shifting organizational strategic
attention towards a more global mindset is an example of organizational forces of globalization.
Consequently, these forces have inevitably caused changes in the global marketplace. Such
changes can be viewed as effects of globalization, which ultimately have impact on firms. These
effects are discussed in detail in the following sections.
Globalization effects
Since the 1980s, we have witnessed dramatic changes in the international and global
marketplace. Liberalization of world trade and capital markets led by globalization has created a
new and challenging competitive arena for all firms (Nolan and Zhang, 2003). With the trend
17
towards more interdependence among nations, several changes in the business environment have
emerged. There has been an emergence of global markets for goods, services, labor and
financial capital (Deardorff and Stern, 2002; Hansen, 2002). Consumers’ demands around the
world have converged (Fram and Ajami, 1994; Levitt, 1983; Ohmae, 1989a). Increasing trade
and investment liberalization evoked by advances in transportation and communication
technologies has resulted in larger volumes of international business transactions (Deardorff and
Stern, 2002; Fawcett, Calantone, and Smith, 1997; Fawcett and Closs, 1993).
These aforementioned trends have brought about two key effects of globalization, global
market opportunities and global market threats (Contractor and Lorange, 1988; Fawcett and
Closs, 1993; Hitt, Keats, and DeMarie, 1998; Molle, 2002; Perlmutter and Heenan, 1986;
Sanchez, 1997). It is obvious that globalization not only presents more opportunities to firms,
but also higher levels of threats (D’Aveni, 1994; Eng, 2001; Jones, 2002; Oxley and Yeung,
1998; Shocker, Srivastava, and Ruekert, 1994). While opportunities can arise from globalization,
competition and uncertainty are inevitable. Although frequently mentioned in past literature,
empirical studies relating these effects to firm performance are still scarce. This calls for a need
to study globalization-performance relationships. These two dimensions along with our
theoretical framework and hypotheses are discussed next.
Theoretical framework and hypotheses
Since our study attempts to establish the link between the external environment (i.e.,
globalization effects) and firm performance, we will draw from environmental organization
literature. Due to the multi-level and multi-dimensional nature of the environmental construct,
the level and dimension of the environment to be studied must be clearly specified to minimize
18
conceptual ambiguity and overabstraction (Castrogiovanni, 1991). Among the five levels of
environmental conceptualization (i.e., resource pool, subenvironment, task environment,
aggregation environment, and macro environment), this paper focuses on investigating the macro
environment (i.e., globalization), which is the highest level of environmental conceptualization
and encompasses all the other lower levels of environmental construct mentioned above. It is the
context containing forces which significantly influence organizational characteristics and outputs
(Osborn and Hunt, 1974).
The environment in which firms operate provides resources that influence their survival
and growth and the ability of new entrants to join the environment (Randolph and Dess, 1984).
This refers to one of many environmental dimensions, the environmental munificence, which can
be defined as the scarcity or abundance of critical resources needed by firms operating within an
environment (Castrogiovanni, 1991; Dess and Beard, 1984; Pfeffer and Salancik, 1978). Three
sub-dimensions of environmental munificence include: 1) growth/decline, 2) capacity, and 3)
opportunities/threats.
Amid globalization, firms are affected by the changes in both market opportunities and
threats (Frenkel and Peetz, 1998; Hitt, Keats, and DeMarie, 1998; Kulmala, Paranko, and UusiRauva, 2002). These opportunities and threats are two dimensions of the macro environment
emphasized in this study. They can also be regarded as forces, which affect organizational
outputs, i.e., firm performance. Hence, we hypothesize that there is a direct relationship between
these two dimensions of globalization effects and firm performance (see Figure 2.1).
19
Figure 2. 1
A Model of Globalization Effects and Firm Performance
Global Market
Opportunities
Global Competitive
Threats
H1 +
H2 -
Firm
Performance
H3 Global Market
Uncertainty
Global market opportunities and firm performance
Global market opportunities can be defined as increases in market potential, trade and investment
potential and resource accessibility resulting from globalization (Contractor and Lorange, 1988;
Fawcett and Closs, 1993; Jones, 2002; Levitt, 1983; Shocker, Srivastava, and Ruekert, 1994).
Developments in information technology, removal of trade and investment barriers,
privatization, and deregulation of trade and investment policies have provided firms seeking
international markets with tremendous opportunities (Scully and Fawcett, 1994). Such changes
in the business environment enable firms to not only access new markets but also lower costs by
relocating their operations and exploiting cheap resources around the world (Czuchry and Yasin,
2001). Firms can outsource their production in various locations to lower their costs (Chimerine,
1997). Market transactions have also become more efficient due to globalization of technology
(Peterson, Welch, and Liesch, 2002). These new market opportunities have eventually fostered
rapid growth in various economic sectors in many regions around the world (Graham, 1996). A
large volume of cross-border flows of trade, investment, and technology during the 1990s and
20
early 2000s is excellent evidence of increasing opportunities driven by globalization (UNCTAD,
2003).
As discussed earlier, globalization increases market potential, trade and investment
potential and resource accessibility of firms. It has become easier for firms to outsource their
production to different locations to gain benefits from location advantage since less trade and
investment barriers are present in today’s global marketplace (Chimerine, 1997; Czuchry and
Yasin, 2001). Firms are able to reach out and serve many new untapped markets around the
globe. Liberal movements of financial and human capital also facilitate their business
transactions. Moreover, advances in communication technology and information systems also
lower search costs and improve efficiency (Peterson, Welch, and Liesch, 2002).
Hence, it is clear that globalization makes resources necessary for a firm’s growth and
success more abundant. Given that these opportunities are likely to enhance the firm
performance, the first hypothesis of this study can be stated as:
H1: Firm performance is positively influenced by global market opportunities.
Global market threats and firm performance
Global market threats can be further categorized into 1) global competitive threats and 2) global
market uncertainty. Global competitive threats are defined as the intensified competition in
global markets resulting from larger numbers of competitors in the global marketplace (D’Aveni,
1994; Hafsi, 2002). Along with higher competition, another threat posed by globalization is
global market uncertainty, which refers to the increasing complexity and demand uncertainty in
the market (Burgers, Hill, and Kim, 1993; Chimerine, 1997; Courtney, 2001; Oxelheim and
21
Wihlborg, 1991). These two types of global market threats and their hypothesized relationships
are discussed in detail in the following sections.
Global competitive threats
Although globalization enhances a firm’s market opportunities, it also increases the amount and
level of competition faced by such firms. Trade liberalization, technological developments, and
convergence of governmental macroeconomic policies associated with globalization have made
it easy for firms around the globe to enter different geographic markets, and thus, intensify the
competitive atmosphere for firms around the world (Hafsi, 2002; Harvey and Novicevic, 2002).
Globalization has dramatically changed the competitive terrain faced by firms from both
developed and emerging economies (Nolan and Zhang, 2003; Scully and Fawcett, 1994). Firms
operating at different levels—domestic, regional, international and global—are now competing
against one another. Hence, it is obvious that globalization has brought about a new competitive
landscape referred to as “hypercompetitive markets” (Hitt, Keats, and DeMarie, 1998, 24), one
that presents enormous threats to firms in every economic sector since it makes a firm’s relative
competitive advantage very time-sensitive (Harvey and Novicevic, 2002).
In addition, globalization also enables consumers to gather information easier, faster, and
at lower costs. Thus, they become well aware of alternative products, and are ready to switch.
Given a growing number of competitors, resources are becoming increasingly scarce
(Castrogiovanni, 1991; Dess and Beard, 1984; Porter, 1980). Such hypercompetitive situations
coupled with scarce resources is harmful to firm performance (Beard and Dess, 1981; Singh,
House, and Tucker, 1986). Firms are now faced with less pricing flexibility due to intensified
competition and buyers’ resistance, which have led to a lower rate of return (Chimerine, 1997).
22
Therefore, we hypothesize that there is a negative relationship between global competitive
threats and firm performance.
H2: Firm performance is negatively influenced by global competitive threats.
Global market uncertainty
Global market uncertainty, which refers to the increasing complexity and demand uncertainty in
the market (Burgers, Hill, and Kim, 1993; Courtney, 2001; Oxelheim and Wihlborg, 1991) is
another threat confronted by firms operating in the global marketplace. Firms are faced with
increasing difficulties in planning and making decisions (Chimerine, 1997; Hitt, Keats, and
DeMarie, 1998). Demand has become hard to forecast for various reasons. Since a growing
number of firms now participate in the global marketplace, forecasting demand and/or
competitors’ responses has become increasingly difficult. Moreover, technology is changing at a
rapid pace and information about new products is easily accessible by consumers. This has
enabled consumers to shift between producers, making demand become less predictable and
uncertain (Chimerine, 1997).
Since operating in the global marketplace increases the level of uncertainty encountered
by firms, their performance is affected. In addition, past studies found a negative relationship
between perceived uncertainty and firm performance (Downey and Slocum, 1982; Gerloff, Muir,
and Bodensteiner, 1991; Waddock and Isabella, 1989). Thus, global market uncertainty is
hypothesized to negatively affect firm performance.
H3: Firm performance is negatively influenced by global market uncertainty.
23
Research context
The two countries selected as the research settings for this study are Thailand and the U.S.
These countries provide rich research contexts due to differences in terms of their degree of
globalization (Foreign Policy, 2001, 2003), level of economic development, and national
competitiveness (Porter, et al., 2000; Porter and Schwab, 2003). While the U.S. is highly
globalized, Thailand is considerably less globalized. According to a survey conducted by AT
Kearney and EDS Company in cooperation with Foreign Policy Magazine (2004), Thailand is
ranked 48th, and the U.S. is ranked 7th on the globalization index.
Thailand is classified as a lower-middle-income economy, one in which the Gross
National Income (GNI) per capita is between $736 and $2,935, while the U.S. is considered a
high-income-economy whose GNI per capita is above $9,076 (The World Bank Group, 2003).
Furthermore, the national competitiveness of these two nations differs dramatically. The U.S. is
the second most competitive country in the world whereas Thailand is ranked number 40 on the
national competitiveness index (Porter and Schwab, 2003).
Given those sharp contrasts, it is perhaps worthwhile to examine whether the
relationships between globalization effects and firm performance are similar or different.
Moreover, using sample groups from two countries allows us to focus on the generalizability of
this study in order to provide useful information for further research.
Research method
Sample
The electronics and chemical industries were found to have a large number of exporters in both
Thailand and the U.S. due to lower manufacturing costs in the former and more advanced
24
technology in the latter. For this reason, firms in these two industries were selected as the
population base of this study. Recent lists of exporting firms in Thailand were identified from
two sources: 1) Export-Import Bank, Thailand (2001-2003) and 2) Department of Export
Promotion, Thailand (2003). These two sources are reliable and legitimate because they
represent the authorities that oversee and support exporters in Thailand. Therefore, these sources
provide the most complete set of exporting firms in Thailand classified by industries. A total of
1,050 firms (450 electronic exporters; 600 chemical and pharmaceutical exporters) are included
in the sampling frame.
The sample in the U.S. consists of firms in manufacturing sectors having the first three
digits of the North American Industry Classification System (NAICS) of 334- and 325-. Lists of
qualified firms were obtained from Harris InfoSource’s (2001) database and Ward’s Business
Directory of U.S. Private and Public Companies by Gale Group (2001). We relied on these two
directories because they classify firms based on the NAICS and provide information regarding a
firms’ export activity, necessary information for this study. Therefore, we randomly selected our
samples from these lists. This yielded the final sample size of 692 U.S. exporters.
Survey design and data collection
The main research instrument in this study was a questionnaire, initially designed based on
previous studies. The questionnaire was designed in English and revised after discussing with
fifteen experts and managers and a pretest with twenty firms. It was then translated into Thai
and back-translated by two independent bilinguals using the method suggested by Douglas and
Craig (1983). This involved original translation, back-translation, and extensive refinements
25
until the translated instruments possessed both conceptual and functional equivalences (Cavusgil
and Das, 1997; Green and White, 1982; Mintu, Calantone, and Gassenheimer, 1994).
The key informant technique (Campbell, 1955) was used to collect data. The targeted
key informants included the presidents, owners, or middle-level managers (general managers or
marketing managers) who are typically top decision makers of the firms and are most
knowledgeable about the firms’ overall activities. The questionnaires were mailed to 1,050 and
692 firms in Thailand and the U.S., respectively. In both countries, three waves of mailings were
sent to the key informants in our sampling frame. In addition, a telephone follow-up was
conducted one week after each of the mailings to request and encourage participation. After
eliminating undelivered mail and firms that are no longer exporting or out of business, the total
valid mailings were 767 in Thailand and 359 in the U.S.
A total of 223 completed surveys were returned, and 208 were usable. Table 2.1 shows
the distribution and summary of responses by country. The overall response rate was 20%.
Table 2. 1
Survey Response Rate
U.S.
692
(333)
359
(2)
(299)
58
17%
Total number of questionnaires mailed
Number of invalid addresses
Number of successfully mailed questionnaires
Number of incomplete returned questionnaires
Number of unreturned questionnaires
Number of valid returned questionnaires
Response Rate
Thai
1050
(283)
767
(13)
(604)
150
21%
Total
1742
(616)
1126
(15)
(903)
208
20%
Non-response bias analysis
We used two methods to estimate non-response bias. The first approach involves dividing
responses into early and late response groups on the basis of their arrival dates (Armstrong and
Overton, 1977) while the second approach requires a random and equal split of responses. Then,
26
a comparison of differences in the mean of responses between early and late groups and between
two equally and randomly split groups can be conducted along key constructs of the study. Such
comparison is considered a valid test of non-response bias as documented and practiced by a
volume of studies (e.g., Li and Calantone, 1998; Wu, Mahajan, and Balasubramanian, 2004).
The questionnaires of two countries were initially divided into two groups based on their
arrival dates. The first group of responses, early response group, consisted of questionnaires
received during the first four weeks of the survey period. Questionnaires received afterwards
were considered late responses. The early response group included 119 firms (90 from Thailand
and 29 from the U.S.) or 57 percent of total valid replied mails. The remaining 89 firms (60
from Thailand and 29 from the U.S.) were grouped as late responses, and this accounted for 43
percent of the total responses.
The questionnaires were categorized randomly into two equal groups. Following this
approach, two data groups with an equal number of responses (i.e., 104) were generated. The
means of the major constructs in this study were compared in both groupings, and no significant
differences were found (see Tables 2.2 and 2.3). This suggests that non-response bias is not a
concern.
Table 2. 2
Comparison of Early and Late Responses
Construct
F-Statistics: Test
of Equality of
Variances
(P-value)
T-Statistics:
Equal Variances
Assumed
(P-value)
T-Statistics:
Equal Variances
Not Assumed
(P-value)
Wilcoxon W
Z-Statistics
(P-value)
Global market opportunities
0.186
(0.666)
0.633
(0.527)
0.628
(0.531)
-0.221
(0.825)
Global competitive threats
1.460
(0.228)
-0.990
(0.323)
-0.999
(0.319)
-0.382
(0.703)
Global market uncertainty
0.028
(0.867)
0.317
(0.751)
0.316
(0.752)
-0.827
(0.408)
27
Table 2. 3
Comparison of Two Randomly and Equally Split Responses
Construct
F-Statistics: Test
of Equality of
Variances
T-Statistics:
Equal Variances
Assumed
T-Statistics:
Equal Variances
Not Assumed
Wilcoxon W
Z-Statistics
Global market opportunities
2.073
(0.151)
-1.177
(0.241)
-1.177
(0.241)
-1.012
(0.312)
Global competitive threats
0.000
(0.994)
1.366
(0.173)
1.366
(0.173)
-0.048
(0.961)
Global market uncertainty
0.214
(0.644)
0.312
(0.756)
0.312
(0.756)
-1.465
(0.143)
Note: P-value is in parentheses.
Measures
Dependent variable: Firm performance
Firm performance was measured using four self-reported items that reflect the level of a
managers’ satisfaction in terms of return on investment, sales goals, profit goals, and growth.
These items were adopted from Grewal and Tansuhaj (2001) and were rated on a seven-point
scale (1 = very unsatisfactory and 7 = very satisfactory). We used subjective performance
measures in this study for two major reasons. First, past studies indicate that both perceptual and
objective measures of performance yield consistent results (Dess and Robinson, 1984; Hart and
Banbury, 1994; Naman and Slevin, 1993; Pearch, Robbins, and Robinson, 1987). Next, the
secondary financial data indicating the expenses and revenues of firms from emerging markets is
either unavailable or difficult to obtain due to the size and non-public nature of their businesses
(Sapienza, Smith, and Gannon, 1988).
Globalization effects
Global market opportunities are defined as increases in market potential, trade and investment
potential and resource accessibility resulting from globalization. Global market threats can be
28
further categorized into 1) global competitive threats and 2) global market uncertainty. Global
competitive threats refer to the intensified competition in global markets resulting from a larger
number of competitors in the global marketplace. Global market uncertainty is defined as the
increasing complexity and demand uncertainty in the market.
Based on these dimensions of globalization effects, measurement items were generated
based on a review of past literature (Archibugi and Michie, 1995, 1997; Fawcett, Calantone, and
Smith, 1997; Fawcett and Closs, 1993; Fram and Ajami, 1994; Levitt, 1983; Morrissey and
Filatotchev, 2000; Ohmae, 1989a; Zou and Cavusgil, 2002). All items were rated on a sevenpoint Likert scale. Global market opportunities were measured using six items. Global
competitive threats and global market uncertainty were measured using two and three items,
respectively. Table 2.4 presents the items used to measure globalization effects. Scale items
anchored by “strongly disagree” (1) to “Strongly Agree” (7).
Table 2. 4
Measures of Globalization Effects
Global market opportunities:
GMO1 Globalization has increased my firm’s opportunities to develop customer markets
worldwide.
GMO2 Globalization has increased my firm’s opportunities for trade and investment.
GMO3 Globalization has increased my firm’s market potential.
GMO4 Globalization has increased my firm’s opportunities to expand the firm’s products and/or
markets.
GMO5 Globalization has facilitated my firm’s international market expansion.
GMO6 Globalization has made it easy for my firm to identify potential customers.
Global competitive threats:
GCT1 Globalization has increased the number of competitors my company is facing.
GCT2 Globalization has increased the level of competition my company is facing.
Global market uncertainty:
GMU1 Globalization has increased the difficulty in forecasting demand for the firm’s products.
GMU2 Markets have become increasingly uncertain due to globalization.
GMU3 Globalization has caused unpredictable changes in consumer purchasing patterns.
29
Measure development and validation
General measurement approach
Given the scarcity of prior empirical research, the scale to measure the effects of globalization
was newly generated. Since observed variables were manifestations of underlying construct,
reflective measures were used to assess the constructs of interest in this study (Bagozzi and
Baumgartner, 1994). Therefore, confirmatory factor analysis by means of AMOS 4.01
(Arbuckle, 1999) was used to assess the psychometric properties of the scales to validate the
measures (Anderson and Gerbing, 1988; Fornell and Larcker, 1981).
Scale assessment
Before merging two national sub-samples for measurement validation, an assessment of
measurement invariance was conducted to ensure cross-cultural equivalence of the constructs
(Steenkamp and Baumgartner, 1998). Following the procedure suggested by Steenkamp and
Baumgartner (1998), configurational invariance and metric invariance must be achieved. While
the former refers to the cross-cultural equivalence in the factorial structure underlying a set of
observed measures, the latter implies equivalence in the scale intervals. Applying multiple group
confirmatory factor analysis, the results revealed full configurational invariance and metric
invariance. Hence, it can be concluded that merging the two national sub-samples is valid.
Table 2.5 provides a summary of our scale assessment. The chi-square (χ2) of the
measurement model was 104.278 (degree of freedom = 82). The comparative fit index (CFI),
normed fit index (NFI), non-normed fit index (NNFI), and goodness of fit index (GFI) were .98,
.95, .98, and .94, respectively. These fit indices of above .90 are considered acceptable (Bentler,
1992; Byrne, 2001; Diamantopoulos and Siguaw, 2000; Jöreskog and Sörbom, 1993).
30
Table 2. 5
ρc), and
Factor Loadings (λ), Squared Multiple Correlation (R2), Composite Reliability (ρ
Cronbach Alpha (α)
Thailand
Items
λ
R2
GMO1
GMO2
GMO3
GMO4
GMO5
GMO6
0.787
0.877
0.818
0.854
0.784
0.605
0.620
0.769
0.670
0.730
0.615
0.533
GCT1
GCT2
0.912
0.865
GMU1
GMU2
GMU3
0.790
0.687
0.574
The U.S.
α
λ
R2
0.86
0.91
0.924
0.737
0.840
0.900
0.915
0.745
0.853
0.543
0.706
0.810
0.837
0.555
0.831
0.748
0.83
0.88
0.921
0.988
0.623
0.501
0.530
0.60
0.73
0.786
0.958
0.822
ρc
Total
α
λ
R2
ρc
α
0.94
0.87
0.828
0.829
0.824
0.873
0.836
0.677
0.685
0.687
0.679
0.762
0.700
0.548
0.86
0.92
0.847
0.977
0.95
0.87
0.892
0.952
0.796
0.906
0.84
0.92
0.617
0.918
0.676
0.89
0.79
0.742
0.841
0.721
0.551
0.707
0.519
0.66
0.81
ρc
0.761 0.579
0.703 0.520
0.740 0.547
FP1
0.900 0.810
0.806 0.650
0.884 0.782
FP2
0.86
0.92
0.85
0.77
0.84
0.91
0.948 0.898
0.874 0.763
0.923 0.852
FP3
0.859 0.738
0.715 0.512
0.825 0.681
FP4
Labels of variables: GMO = global market opportunities, GCT = global competitive threats, GMU = global market
uncertainty, FP = firm performance
Root mean square of error approximation (RMSEA) was .036. This value of RMSEA is
indicative of good fit since it is less than .05, which is commonly regarded as the threshold
(Browne and Cudeck, 1993; McCallum, Browne, and Sugawara, 1996). Construct reliabilities
were assessed using squared multiple correlation (R2), Cronbach alpha and composite reliability
(ρc). Every indicator was a reliable measure of its designated construct since each squared
multiple correlation was substantial, i.e., greater than 0.5 (Diamantopoulos and Siguaw, 2000).
The Cronbach alphas of all constructs were greater than 0.7, the minimum acceptable level
suggested by Nunnally and Bernstein (1994). In addition, the composite reliabilities of the
constructs exceeded 0.6, the benchmark recommended by Bagozzi and Yi (1988).
31
All indicators loaded significantly and substantively on their hypothesized factors (p
<.001). We assessed the discriminant validity of each construct in two ways. First, the square
roots of the average variance extracted in Table 2.6 are greater than all corresponding
correlations (Fornell and Larcker, 1981). Second, all constructs exhibit discriminant validity
because each correlation is less than 1 by an amount greater than twice its respective standard
error (Bagozzi and Warshaw, 1990). Based on the aforementioned criteria, all scales used in this
study proved to be valid and reliable. Table 2.6 presents the descriptive statistics for latent
constructs along with their correlations, which are based on averages of items. From our
preliminary investigation on the correlations, the direction of relationships between three
dimensions of globalization effects and firm performance were consistent with our hypotheses.
Table 2. 6
Descriptive Statistics: Mean, Standard Deviation, and Correlations
1. Global market opportunities (GMO)
2. Global competitive threats (GCT)
3. Global market uncertainty (GMU)
4. Firm performance (FP)
Mean
Standard Deviation
** p < .01
* p < .05
GMO
0.72
.22**
-.03
.14*
5.11
1.15
GCT
0.85
.46**
-.11
5.49
1.41
GMU
0.63
-.06
4.51
1.28
FP
0.75
4.61
1.25
Notes: Numbers shown in boldface denote the square root of the average variance extracted.
32
Results and discussion
Preliminary test of country and industry effects
We initially assessed the differences in the mean of the dependent variable—firm performance—
between two national sub-samples and two industry sub-samples by using one-way ANOVA.
The result revealed that there is no difference in the mean of firm performance between Thai and
the U.S. exporters (F-statistics = 2.226 at p > .10) or between electronics and chemical industries
(F-statistics = 0.336 at p > .10). Therefore, there is no significant difference in firm performance
between firms from these two countries and industries. This is not unexpected since the
performance of firms in similar industries (i.e., high-tech industries such as chemical and
electronics) may be very similar.
Estimation
Since there is no difference in the mean of dependent variable across industries and countries and
the results of measurement invariance have confirmed equality in the constructs across these two
countries, data were pooled for model estimation. Maximum Likelihood Estimation (MLE) was
used to fit the structural model presented in Figure 2.1. Fitting the structural model after the
measurement model has been purified is the procedure suggested by Anderson and Gerbing
(1988) and is commonly practiced by many academic scholars such as Li and Calantone (1998)
and Zou and Cavusgil (2002). The estimates were computed using AMOS 4.01 (Arbuckle,
1999). The structural proposed model of globalization effects and firm performance is presented
in Figure 2.2 along with parameter estimates and fit statistics.
33
Figure 2. 2
MLE Estimation for Model
GMO1
GMO2
GMO3
0.83
0.83
0.82
Global Market
Opportunities
0.87
GMO4
0.84
GMO5 0.68
.187(2.704**)
FP1
GMO6
0.74
0.88
0.89
GCT1
0.95
GCT2
Global Competitive
Threats
-.154(-2.139*)
Firm
Perfromance
0.92
GMU2
FP3
0.68
.058 (.652)
GMU1
FP2
FP4
0.74
0.84
0.72
Global Market
Uncertainty
GMU3
** Significant at .01.
* Significant at .05.
2
Notes: Model statistics: Chi-square (χ ) = 145.889, degree of freedom = 84, p <.01; goodness of fit index
(GFI) = .915, normed fit index (NFI) = .931, non-normed fit index (NNFI) = .961, and comparative fit
index (CFI) = .969.
As shown in Figure 2.2, the χ2of 145.889 (degree of freedom = 84) is significant at .05
level.
Other fit indices examined in this paper included goodness of fit index (GFI), normed fit
index (NFI), non-normed fit index (NNFI), and comparative fit index (CFI). The GFI of .915,
NFI of .931, NNFI .961, and CFI of .969 were above .90, the minimum desirable level
recommended by Bentler (1992), Byrne (2001), Diamantopoulos and Siguaw (2000) and
Jöreskog and Sörbom (1993). Moreover, all the standardized residuals were small. Thus, we
conclude that the model fits data well.
34
Hypothesis testing
To test the hypothesized relationships between globalization effects and firm performance, we
used the estimates of the path coefficients. The path coefficients in Figure 2.2 indicate that firm
performance is affected positively and significantly by global market opportunities (t = 2.704, p
< .01). As hypothesized, global competitive threats negatively influence the firm performance.
The path coefficient between the global competitive threat and firm performance is positive and
significant (t = -2.139, p < .05). Thus, H1 and H2 are supported. Nonetheless, we found no
support for H3 since firm performance is not significantly influenced by global market
uncertainty (t = .652, p > .5). Overall, the structural model fits the data adequately, and the
hypothesized relationships between two effects of globalization—global market opportunities
and global competitive threats—and firm performance are significant, and supported by the
findings. Table 2.7 summarizes the results of the hypothesis testing.
Table 2. 7
Results of Hypothesis Testing
Variables
Global market opportunities
Hypotheses
Firm Performance
H1 Positive
(Supported)
Global competitive threats
Firm Performance
H2 Negative
(Supported)
Global market uncertainty
Firm Performance
H3 Negative
(Not supported)
35
In addition to testing the hypothesized relationship, we also tested whether the effect of
global market opportunities is greater than global market threats. We then compared the two
path coefficients (i.e., between global market opportunities and firm performance and between
global competitive threats to firm performance) by using the following method:
βˆ1 + βˆ 2
( SE βˆ ) 2 + ( SE βˆ ) 2 + 2COV ( βˆ1 βˆ 2 )
1
2
The result shows that the difference between the two path coefficients is not statistically
significant (t = .3378). Since there is no substantial difference in the two paths, we conclude that
the effects of global market opportunities on firm performance are neither greater nor less than
the effects of global competitive threats on firm performance. This finding substantiates the
argument that globalization brings about both opportunities and competition.
The insignificance of hypothesis 3 suggests that there is no direct relationship between
global market uncertainty and performance. This is not surprising since the causal relationship
between uncertainty and performance has been debatable (Khatri and D’Netto, 1997). As
alluded to by Khatri and D’Netto (1997), it is the complex nature of the uncertainty construct per
se that obscures the causal relationship between uncertainty and performance. Frequently,
studies have treated uncertainty as a moderator (c.f., Choe, 2003; Grewal and Tansuhaj, 2001;
Sarkar, Echambadi, and Harrison, 2001) because it is difficult to establish a direct causal link
between uncertainty and performance. However, we did not find a significant moderating effect
of global market uncertainty on performance when the variable was added as an interaction term
in the model.
Another possible way to establish an indirect relationship between uncertainty and
performance is by including some mediating variables. As shown in a recent study, the
36
relationship between uncertainty and performance can be indirect, i.e., mediated by networking
activities (Sawyerr, McGee, and Peterson, 2003). The results of their study show that as
uncertainty increases, firms engage more in networking activities, which finally enhances firm
performance. This implies that uncertainty alone can be harmful for firm performance unless
certain strategies, such as networking activities and alliance participation, are implemented to
mitigate its negative impact. Therefore, the investigation of an indirect relationship between
global market uncertainty and performance in future research proves to be worthwhile.
Contributions and future directions for research
Theoretical contributions and managerial implications
Despite a large volume of literature discussing the effects of globalization, there is a scarcity of
empirical research investigating its effects on business performance. We advance the literature
by categorizing the effects of globalization into different dimensions, and develop a model to test
the relationships between these effects and firm performance. The findings from this study
support the argument that globalization not only benefits firms in terms of increasing
opportunities, but also hurts business performance due to higher competitive threats (e.g.,
Contractor and Lorange, 1999, D’Aveni, 1994, Jones, 2002, Shocker, Srivastava, and Ruekert,
1994). In addition, we expand literature on globalization and environmental-organization
interface by developing valid and reliable measures of globalization effects, and testing the scale
across two distinct cultures. The measures were confirmed equivalent across cultures. We hope
that these constructs generate venues for future research on globalization and related topics.
The findings of our study have several implications for managers in the global
marketplace. This study elaborated on the different effects that globalization has on business.
37
The results indicate that such effects are not significantly different across cultures. This study
also confirms that globalization is a universal phenomenon and that firms are inevitably affected.
Globalization can affect firm performance positively and negatively. While global market
opportunities are likely to enhance firm performance, global competitive threats tend to worsen
it. Therefore, managers must be aware of such double-edged effects, and try to capitalize on
opportunities while converting threats into opportunities. Appropriate strategies, such as
developing networking relationships with other firms, must be carefully designed and
implemented in order to take advantage of global market opportunities and minimize the threats
from increasing competitive intensity.
Limitations and directions for future research
Our study is among a very few empirical studies of globalization effects. Although the scales to
measure globalization effects were developed from a careful literature review, they are new, and
thus need further verifications and applications. Moreover, the model presented here is limited
to the effects of globalization on business but not on society. In the short run, intense global
competition may be deemed harmful for firm performance. However, in the long run, such
competition will provide a healthier economy that benefits the overall society. Higher
competition will eventually encourage firms to aim for continual improvements, which are good
for both the firms and society. Therefore, the results of this study must be viewed with these
limitations.
Future research may attempt to find theories to explain the effects of globalization and
investigate the role of different strategies and organizational structures in mediating the effects of
globalization on firm performance. Alliance formation and strategic flexibility have been
38
recommended as effective means to maneuver firms through globalization (Contractor and
Lorange, 1988; Hitt, Keats, and DeMarie, 1998; Ohmae, 1989b; Spekman and Sawhney, 1990).
A study examining such relationships would provide useful information for managers operating
in global industries on how to manage the effects of globalization more effectively.
Furthermore, research on how the fit among different organizational structures (e.g., mechanistic
vs. organic) and strategies (e.g., cost leadership, differentiation, diversification, etc.) may
enhance firm performance in the presence of globalization effects and offers another fruitful
venue for future studies.
Conclusion
In this paper, we have advanced our knowledge of globalization phenomenon by defining its
effects and categorizing them into opportunities and threats. In doing so, we addressed the
question of how globalization affects firm performance by empirically examining the influence
that each globalization effect has on business performance. This study provides considerable
support for literature arguing that globalization acts as a two-edged sword, one that can be
beneficial and detrimental to business. Managers should be prepared to cope with such effects
and try to capitalize on global market opportunities while carefully managing its inherent threats.
Innovative and effective strategies should be designed and implemented to enable firms to gain
competitive advantage and attain long-term victory. Building on our theoretical framework,
further research should focus on how different strategies help firms navigate successfully
through today’s increasingly globalized condition.
39
CHAPTER THREE
GLOBALIZATION EFFECTS, CO-MARKETING ALLIANCES, AND PERFORMANCE
Introduction
During the past two decades, globalization has caused dramatic changes to business practices
around the world. Companies (e.g., IBM, Intel, Microsoft, and Philips) have not only start
outsourcing from various parts of the world, but also forming alliances with other firms (GMFord- DaimlerChrysler, Ford-Mazda, and GM-Honda, BP-Mobil, NUPI-Chevron Texaco, and
star alliances). Nevertheless, limited empirical studies have been conducted to investigate how
globalization actually affects firms and how firms respond to such effects. Thus, this paper aims
to examine such effects by focusing on how globalization influences the degree of a firm’s
international marketing cooperation, which ultimately affects its international marketing
performance.
Globalization refers to the process of increasing social and cultural inter-connectedness,
political interdependence, and economic, financial and market integrations (Eden and Lenway,
2001; Giddens, 1990; Molle, 2002; Orozco, 2002). Dramatic changes in the business
environment that cause shifts in business conduct and marketing activities of firms around the
world include, for example, the emergence of global markets for goods and services, labor, and
financial capital, advances in technologies, and a reduction in traditional barriers to trade and
investment (Deardorff and Stern, 2002; Jones, 2002; Orozco, 2002; Richmond, 2002). These
changes have resulted in two significant globalization effects—the emergence of global market
opportunities and threats—which are the two most often cited effects in globalization-related
literature (Contractor and Lorange, 1988; Fawcett and Closs, 1993; Hitt, Keats, and DeMarie,
1998; Molle, 2002). These two major globalization effects eventually lead to adjustments in
40
business and marketing activities of firms around the world (Hitt, Keats, and DeMarie, 1998;
Jones, 2002; Shrader, 2001).
Globalization effects and firm responses
Due to the emergence of global market opportunities and global market threats, firms have been
forced to respond quickly to these effects. Unlike other environmental changes, the effects of
globalization are far more pervasive—affecting every individual, business, industry, and country
(Garrette, 2000). The environment surrounding business today is characterized as a
“hypercompetitive” environment—a faster and more aggressive competitive environment
(D’Aveni, 1994; Harvey and Novicevic, 2002). Major forms of business restructuring in
response to the dramatic changes brought by globalization include, for example, investments in
new technologies, downsizing and reengineering, the formation of strategic alliances and
networks, and a shift from international and multinational to global and transnational strategies
(Jones, 2002). Among these various forms of business restructuring designed to manage
globalization effects, alliance formation is considered the most remarkable business trend of the
past decades (Hwang and Burgers, 1997; Kasmai and Iijima, 2002). Therefore, it is of interest to
both academics and practitioners to explore how alliances help firms achieve superior
international marketing performance in the globalization era.
Since globalization makes alliances an integral part of a firm’s strategy to better satisfy
customers and to achieve sustainable competitive advantage (Hitt, Keats, and DeMarie, 1998),
the proliferation of alliances in recent years is not surprising. It has become difficult for firms to
stay competitive in this era without allying with other firms (Kasmai and Iijima, 2002; Ohmae,
1989b; Webster, 1992). Moreover, to achieve superior marketing performance in the present
41
business environment, firms need to manage relationships with partners, customers, and different
parties in the value chain (Webster, 1992). As a result, there has been an increasing trend
towards more cooperation among firms, both vertically and horizontally (Hoskisson, Hitt, and
Ireland, 2004; Ireland, Hitt, and Vaidyanath, 2002). Such inter-firm cooperation is especially
important for firms to compete in the global marketplace. In order for firms to succeed in
international markets, they need cooperate with other firms and/or governmental agencies
(Ireland, Hitt, and Vaidyanath, 2002; Shrader, 2001; White, 2000). Thus, the purpose of this
paper is to explore whether globalization affects the degree of international marketing
cooperation of firms participating in co-marketing alliances, a type of strategic alliance in which
partners cooperate in one or more marketing activities (Bucklin and Sengupta, 1993, 32).
Specifically, we propose to investigate the influence of globalization effects on the degree of
firms’ cooperation in co-marketing alliances, and the relationship between such cooperation and
the firms’ international marketing performance.
Research emphasis and research questions
Co-marketing alliances
Although many authors have alluded to the influence of globalization on the growth in alliance
formation (e.g., Ariño and Torre, 1998; Hitt, Keats, and DeMarie, 1998; Hwang and Burgers,
1997; Ohmae, 1989b), there is no empirical study that establishes any links between the two. By
investigating the effects of globalization on the degree of cooperation in alliances, this study
extends current literature on the rationale for alliance cooperation and the performance of allying
firms. While most past studies focus on other forms of strategic alliances—R&D collaboration
teams, joint ventures, etc.—little research attention has been paid to co-marketing alliances. The
42
two reviews of literature on strategic alliances conducted by Spekman et al. (1998) and Ireland,
Hitt and Vaidyanath (2002) indicate that most empirical studies focus on strategic supplier-buyer
alliances (supply chain alliances) and technological alliances between firms in high-tech
industries. Very few studies pay attention to alliances among firms at the same level of the value
chain (e.g., Bucklin and Sengupta, 1993; Robson and Dunk, 1999; Venkatesh, Mahajan, and
Eitan, 2000; Young, Gilbert, and McIntyre, 1996). To further develop this under-researched area
of alliance research, we chose to focus on co-marketing alliances.
Co-marketing alliances are considered a specific type of strategic alliance. It is one type
of business-level competitive strategy—horizontal complementary strategic alliance—whose
primary focus is on creating a competitive advantage in specific product markets by pooling
resources and capabilities of firms at the same stage of the value chain (Hoskisson, Hitt, and
Ireland, 2004). The scope of co-marketing alliances is limited to marketing activities such as
customer service, marketing, promotion, and distribution (Bucklin and Sengupta, 1993; Das,
Sen, and Sengupta, 2003; Varadarajan and Cunningham, 1995). This particular type of alliance
is worthwhile studying because most types of inter-firm cooperation are formed in order to
strengthen their market position, which is the objective of co-marketing alliances. The
coordination of marketing activities to achieve superior market position and performance in
terms of sales, market share, and profitability is their most fundamental task. Moreover, being
non-equity in nature, these alliances are less formal and less committed than others (Hoskisson,
Hitt, and Ireland, 2004). This has made them increasingly popular in recent years. These unique
features and benefits of co-marketing alliances make them an important area for further
investigation.
43
In addition, there has been a lack of research on horizontal alliances, especially in
marketing and international business disciplines since the foci of such inter-firm relationships in
these fields are mainly on vertical alliances (Rindfleisch and Moorman, 2001; Sheth and Sisodia,
1999). Since the role of marketing in formulating and implementing strategic alliances is highly
implicated in most strategic alliances (Varadarajan and Cunningham, 1995), marketing alliances
are usually formed to help firms achieve marketing objectives. Firms form co-marketing
alliances to help them develop market power that enables them to achieve sustainable
competitive advantage, which can never be realized alone.
Furthermore, co-marketing alliances are common in many technology-related industries
where maintaining a position at the forefront in such markets is difficult (Bucklin and Sengupta,
1993). This problem of maintaining continually cutting-edge positions in markets becomes even
more serious given the fast pace of technological changes in globalization era such as today’s
business environment (Ohmae, 1989b). As a result, there has been an increasing trend towards
more marketing cooperation among competitors in response to globalization (Hoskisson, Hitt,
and Ireland, 2004; Webster, 1992). Nonetheless, limited research attention has been given to
these specific types of strategic alliances (Bucklin and Sengupta, 1993; Sheth and Sisodia, 1999).
Hence, the investigation of the degree of cooperation in co-marketing alliances should provide
more insights on how globalization drives such cooperation.
Despite the prevalence of globalization effects, which cause changes in business conduct
and marketing activities around the world, limited attempts have been put forth to assess such
effects on firms. Since marketing is a “context-driven” discipline (Sheth and Sisodia, 1999), the
investigation of globalization effects—as one of the contextual factors surrounding marketing
activities—proves to be worthwhile.
44
Research questions
This paper attempts to answer the following research questions: 1) Does globalization affect the
degree of cooperation in co-marketing alliances? and 2) Do co-marketing alliances influence
firms’ international marketing performance? In answering these research questions, this study
explores the relationship between two major effects of globalization—global market
opportunities and global market threats—and the degree of cooperation in co-marketing
alliances. In addition, the associations between the degree of cooperation and international
marketing performance are also examined.
Global market opportunities and threats are emphasized here because they are often
viewed as the most immediate and apparent effects of globalization (Fawcett, Calantone, and
Smith, 1997; Fawcett and Closs, 1993; Jones, 2002; Molle, 2002). Amid globalization where
dramatic changes in opportunities and threats are pervasive, the need of firms to respond quickly
and with flexibility to their environment has significantly driven an increase in the development
of alliances (Buckley and Casson, 1997; Spekman and Sawhney, 1990; Webster, 1992). The
following sections discuss the theoretical underpinnings, and present a conceptual model of this
study to help provide a better understanding of the relationships among globalization effects,
degree of co-marketing alliance, and international marketing performance of firms.
A review of literature on alliances
In this section, we briefly review alliance literature and discuss different forms of organizational
relationships.
45
Forms of organizational relationships
Based on the conceptualization of Morgan and Hunt (1994), there are ten distinct forms of interand intra- organizational relationships pertaining to the study of relationship marketing. These
ten forms of relationships can be further grouped into four types of partnerships (See Figure 3.1):
1. Supplier partnerships with (1) goods suppliers and (2) service suppliers
2. Lateral partnerships with (3) competitors, (4) nonprofit organizations, and (5)
government
3. Buyer partnerships with (6) ultimate customers and (7) intermediate customers
4. Internal partnerships with (8) functional departments, (9) employees, and (10)
business units
Figure 3. 1
The Relational Exchanges in Relationship Marketing
Supplier Partnerships
Goods
Supplier
1
Business
Units
Employees
Services
Supplier
2
10
Focal
Firm
8
Internal
Partnerships
Competitors
3
9
Functional
Departments
Lateral
Partnerships
4
Nonprofit
Organizations
5
Government
7
6
Intermediate
Customers
Ultimate
Customers
Buyer Partnerships
Source: Morgan and Hunt (1994)
46
While supplier and buyer partnerships represent vertical relationships and alliances, the
lateral and internal partnerships are horizontal in nature. Supplier partnerships can be referred to
as buyer-seller relationships, whereas buyer partnerships are often referred to as channel
relationships. Horizontal relationships, on the other hand, refer to those relationships that exist at
the same level of the value chain, such as relationships among competitors. While lateral
partnerships involve cooperative relationships with external entities, internal partnerships entail
those that are within a firm (Morgan and Hunt, 1994). This lateral partnership between the focal
firm and its competitors, defined as strategic alliance (3 in Figure 3.1) by Morgan and Hunt
(1994), is the focus of this study.
Strategic alliances
A strategic alliance is one form of interorganizational cooperative strategy to improve a firms’
competitive position and performance and to achieve the goals of both individual firms by
integrating and sharing specific resources and skills of the partners (Hitt, et al., 2000; Ireland,
Hitt, and Vaidyanath, 2002; Jarillo, 1988; Varadarajan and Cunningham, 1995). This type of
alliances is worth further study for two main reasons. First, recent literature in management and
marketing suggest that there are well-developed theories on vertical integration, but not on
horizontal relationships (Rindfleisch and Moorman, 2001; Sheth and Sisodia, 1999). Second,
although many studies have been conducted on this type of alliance, little is known about how
the degree of cooperation in such alliances improves the performance of the participating firms.
In addition, strategic alliances among competitors comprise more than half of the total number of
alliances formed within a recent two-year period (Hoskisson, Hitt, and Ireland, 2004).
47
Since there is a wide array of organizational forms, e.g., long-term purchasing
agreements, co-marketing, licensing agreements, R&D collaboration teams, joint ventures, etc.
that constitute strategic alliances (Ireland, Hitt, and Vaidyanath, 2002; Spekman, et al., 1998;
Spekman and Sawhney, 1990), a proper classification of strategic alliances may provide a better
idea of the purposes and differences among types. Following the most recent classification of
Hoskisson et al. (2004), four main types of strategic alliances include 1) joint ventures, 2) equity
strategic alliances, 3) non-equity strategic alliances, and 4) strategic cooperative networks.
Due to the less formal and committed nature of a non-equity alliance, it is not surprising
to see a rapid growth in this type of strategic alliances in recent years (Das, Sen, and Sengupta,
1998). Moreover, non-equity alliances are deemed appropriate for today’s complex environment
characterized by globalization (Inkpen, 2001). Therefore, the emphasis of this paper is to
explore the effects which globalization has on the degree of cooperation in co-marketing
alliances, which is one type of non-equity alliance.
Co-marketing alliances
Co-marketing alliances are a form of strategic alliance (Bucklin and Sengupta, 1993; Morgan
and Hunt, 1994; Robson and Dunk, 1999). It is defined as “a form of working partnership
[which] involve[s] coordination among partners in one or more aspect of marketing and may
extend into research, product development, and even production” (Bucklin and Sengupta, 1993,
32). Working partnership here is referred to as the presence of “mutual recognition and
understanding that the success of each firm depends in part on the other firm, with each firm
consequently taking actions so as to provide a coordinated effort focused on jointly satisfying the
requirements of the customer marketplace” (Anderson and Narus, 1990, 42).
48
A co-marketing alliance is a type of lateral relationship between two or more independent
and legally separated firms that operate at the same level of the value-added chain (Leisen, Lilly,
and Winsor, 2002). From these definitions (Anderson and Narus, 1990; Bucklin and Sengupta,
1993), co-marketing alliances are considered cooperative agreements between firms which
indicate a non-equity structure of strategic alliances. Members of the co-marketing alliance are
expected to coordinate their firms’ resources towards a common marketing strategy, which adds
value to customers (Bucklin and Sengupta, 1993). Co-marketing alliances help collaborating
firms create customer awareness, leverage their unique resources, skills and capabilities in order
to enter into new markets, and gain stronger market positions (Adler, 1966; Bucklin and
Sengupta, 1993; Das, Sen, and Sengupta, 2003; Venkatesh, Mahajan, and Eitan, 2000).
As mentioned in Webster (1994, 8), “in the global markets of the 1990s and beyond,
superior marketing will be a more sustainable source of unique competitive advantage than
superior technology.” It is obvious that marketing has become an important factor to help firms
achieve a competitive advantage. Customer satisfaction is then the key to this success (Webster,
1994). In order to serve customers more successfully in the globalization era, firms need to ally
with other firms since it is difficult or even impossible for one firm to do everything quickly,
effectively, and efficiently due to high competition and uncertainty in the markets (Ohmae,
1989b). Unlike other types of strategic alliances, co-marketing alliances are mainly designed to
help partners coordinate marketing activities with an objective of fulfilling customers’ needs
(Bucklin and Sengupta, 1993; Das, Sen, and Sengupta, 2003). Thus, co-marketing alliances then
become a significant tool to help firms satisfy customers, stay on the competitive edge, and gain
market power in the global marketplace.
49
Building on the aforementioned definition of co-marketing alliances, the degree of
cooperation in co-marketing alliances is defined as the extent to which a firm cooperates with
other firms in the alliance in coordinating marketing activities such as customer service,
advertising, promotion, and sharing distribution channels (Das, Sen, and Sengupta, 2003; Porter,
1985; Venkatesh, Mahajan, and Eitan, 2000). Since international marketing performance is
crucial to the success of firms engaging in international activities, only cooperation in
international marketing activities is an emphasis here. As such, the degree of co-marketing
alliance in this study encompasses only the degree of collaboration for international marketing
activities, which range from international marketing research to marketing plans of the firms in
overseas markets.
Theoretical framework and proposed relationships
A review of literature on alliances indicates that several theoretical perspectives have been used
to explain the formation and success of alliances, for example, transaction cost economics
(Williamson, 1975, 1981), the interorganizational exchange literature (Aldrich, 1979; Benson,
1975; Frazier, 1983; Pfeffer and Salancik, 1978), the market power perspective (Burgers, Hill,
and Kim, 1993; Kogut, 1988), the resource-based view of the firm (Barney, 1991; Wernerfelt,
1984), and the social network theory (Gulati, 1998). Transaction cost economics and
interorganizational exchange literature have been applied to investigate the formation, the
governance structure and the success of co-marketing alliances (e.g., Bucklin and Sengupta,
1993; Robson and Dunk, 1999; Venkatesh, Mahajan, and Eitan, 2000; Young, Gilbert, and
McIntyre, 1996).
50
In the alliance literature, transaction cost economics and market power perspective have
long been used to describe the formation of joint ventures (Jarillo, 1988; Kogut, 1988) and the
governance structure of strategic alliances (Chen and Chen, 2003; Spekman and Sawhney,
1990). Only recently have the social network theory and the resource-based view of the firm
been suggested for investigating the formation and success of strategic alliances (c.f., Chen and
Chen, 2003; Das and Teng, 2000; Gulati, 1998; Ireland, Hitt, and Vaidyanath, 2002; Lambe,
Spekman, and Hunt, 2002).
To gain a better understanding of the relationships between globalization effects and the
degree of cooperation in co-marketing alliance of firms, the present study applies two theoretical
perspectives—the transaction cost economics and the market power perspective—to explain the
phenomenon. Figure 3.2 illustrates the conceptual model and relationships of this study.
Figure 3. 2
Conceptual Model of Globalization Effects, Cooperation and Performance
Global Market
Opportunities
Global Competitive
Threats
Global Market
Uncertainty
P1
P2
Cooperation in
Co-Marketing
Alliance
P3
51
P4
International
Marketing
Performance
Globalization effects and co-marketing alliances
Figure 3.2 shows the proposed relationships among the major constructs: globalization effects,
degree of cooperation in co-marketing alliances and international marketing performance. In the
model, globalization effects are classified into two broad categories, global market opportunities
and global market threats. These two effects are proposed to have different relationships with
the degree of cooperation in co-marketing alliances of firms. In the following section,
theoretical underpinnings, conceptual framework, and hypotheses are presented.
Transaction cost economics and market power perspective
The two key behavioral assumptions underlying transaction cost economics are 1) bounded
rationality and 2) opportunism (Rindfleisch and Heide, 1997; Williamson, 1981). Bounded
rationality indicates human limited ability in processing information, and opportunism refers to
“self-interest seeking with guile” (Williamson, 1975, 6). Due to bounded rationality,
opportunism, uncertainty, frequency of transactions, small-number bargaining, and degree of
assets specificity, hazards in transactions are introduced (Rindfleisch and Heide, 1997;
Williamson, 1991a, b). Therefore, certain safeguarding mechanisms must be employed in order
to control such hazards, and thus increase the costs of the transactions (Kogut, 1988; Rindfleisch
and Heide, 1997).
Alliances enable firms to monitor possible opportunistic behaviors with less costs than
internalizing their operations and more control than leaving the transactions to be performed by
the markets (Chen and Chen, 2003; Gulati, 1998; Jarillo, 1988; Kale, Singh, and Perlmutter,
2000; Spekman, et al., 1998; Tsang, 2000). This is especially true when firms are faced with
high levels of competition and market uncertainty. Since competing in global markets incurs
52
huge fixed costs that make it difficult for one firm to absorb alone, a firm needs to ally with
others in order to share costs and to better serve customers worldwide (Ohmae, 1989b).
Therefore, transaction cost economics considers forming alliances as a strategy that helps firms
expand their strategic capabilities (Burgers, Hill, and Kim, 1993).
Building on the market power perspective (Kogut, 1988), alliances provide a means to
reduce competition and minimize uncertainty evoked by globalization (Burgers, Hill, and Kim,
1993; Gulati and Singh, 1998; Kale, Dyer, and Singh, 2002). Through alliances, firms can
increase their market power in order to gain a competitive position in their market (Bucklin and
Sengupta, 1993; Kogut, 1988). Hence, this perspective regards alliances as a strategy to help
firms reduce competition.
Globalization market opportunities and global market threats
As discussed above, the two key categories of globalization effects most frequently cited in past
literature are 1) global market opportunities and 2) global market threats (Fawcett, Calantone,
and Smith, 1997; Fawcett and Closs, 1993; Jones, 2002; Molle, 2002). For the purpose of this
study, global market opportunities refer to the increases in market potential, trade and investment
potential and resource accessibility resulting from globalization (Contractor and Lorange, 1988;
Fawcett and Closs, 1993; Jones, 2002; Levitt, 1983; Shocker, Srivastava, and Ruekert, 1994).
Such opportunities have enabled firms to access international markets for resources and
customers due to trade liberalization, advances in telecommunication technologies, and a
worldwide convergence of consumers’ demands.
Global market threats, on the other hand, refer to the increases in the number and the
level of competition, coupled with the higher level of uncertainty brought about by globalization
53
(Burgers, Hill, and Kim, 1993; Fawcett and Closs, 1993; Jones, 2002; Ohmae, 1989a; Perlmutter
and Heenan, 1986). Two types of global market threats are 1) global competitive threats and
global market uncertainty. Global competitive threats are defined as the intensified competition
in global markets resulting from a larger number of competitors in the global marketplace
(D’Aveni, 1994; Hafsi, 2002). Trade liberalization, technological developments, and the
convergence of governmental macroeconomic policies associated with globalization have made
it easy for firms from all over the world to enter different geographic markets, thus, intensifying
the competitive atmosphere for firms around the world. At the same time, such changes also
evoke global market uncertainty, which is another threat to firms operating in the global
marketplace, and can be defined as the increasing complexity and demand uncertainty in the
market (Burgers, Hill, and Kim, 1993; Chimerine, 1997; Courtney, 2001; Oxelheim and
Wihlborg, 1991). In sum, while globalization provides more market opportunities to firms, it
also leads to more intense competition and higher market uncertainty (D’Aveni, 1994; Eng,
2001; Jones, 2002; Oxley and Yeung, 1998; Shocker, Srivastava, and Ruekert, 1994).
Conceptual relationships and propositions
Global market opportunities and co-marketing alliances
According to transaction cost economics (Williamson, 1975, 1979, 1981, 1991a, b), firms will
choose the most efficient governance mechanism. Due to increasing global market
opportunities, resources and markets are more easily accessible, thus, lowering the costs of
transactions (Fawcett and Closs, 1993; Levitt, 1983; Peterson, Welch, and Liesch, 2002).
Therefore, firms perceiving ample market opportunities resulting from globalization tend to be
reluctant to increase their degree of cooperation in their existing alliances since the costs arising
54
from opportunistic behaviors might outweigh the potential benefits expected from cooperative
arrangements (Heide, 1994; Heide and John, 1990; White, 2000). When there is more than one
party involved in a transaction, there exists behavioral uncertainty. This is the uncertainty
arising from the difficulties regarding performance evaluation of parties involved in the
transaction (Rindfleisch and Heide, 1997; Williamson, 1985). In the case of increasing global
market opportunities, it becomes more difficult to evaluate the performance of the allying
partners due to the bounded rationality condition—the limited ability to process all
information—and information asymmetry. Therefore, internalizing the firms’ operations may
prove to be the most cost-effective means of governance structure (Williamson, 1985).
Moreover, since globalization provides more opportunities for firms to conduct most of
their transactions more efficiently within their organizations (Peterson, Welch, and Liesch,
2002), firms are more likely to internalize their international marketing activities and less likely
to cooperate with other firms in their co-marketing alliances. Hence, the first proposition for this
study may be stated as:
Proposition 1: The degree of cooperation in co-marketing alliances is negatively
influenced by global market opportunities.
Global competitive threats and co-marketing alliances
To cope with increasing global competitive threats, firms tend to form alliances (Gulati, 1998;
Ireland, Hitt, and Vaidyanath, 2002; Rindfleisch and Moorman, 2001; Sheth and Sisodia, 1999;
Spekman and Sawhney, 1990). Based on the classical industrial organization perspective—the
market power perspective—reducing competition is a means to create and strengthen a firm’s
market power (Burgers, Hill, and Kim, 1993; Kogut, 1988). Firms cooperate instead of compete
55
with one another to gain stronger market power and competitive market position. Cooperating
with other firms not only alleviates competition and improves their competitive position in the
market, but also helps them avoid potential costs resulting from intensified competition
(Contractor and Lorange, 1988; Gulati, 1998; Kale, Dyer, and Singh, 2002).
Furthermore, since globalization inhibits firms from possessing all necessary resources to
compete effectively and efficiently in many markets (Ariño and Torre, 1998; Ohmae, 1989b),
many firms have formed co-marketing alliances with other firms that possess complementary
resources. Alliances enable firms to leverage their unique skills and combine their specialized
resources to build competitive advantages, which help them gain stronger market position and
succeed in global markets (Adler, 1966; Bucklin and Sengupta, 1993; Ireland, Hitt, and
Vaidyanath, 2002). In addition, cooperative arrangements such as alliances are considered one
of the effective means to manage global competitive threats brought about by globalization
(Hamel, 1991; Kasmai and Iijima, 2002; Perlmutter and Heenan, 1986).
Given such intensified competition in global markets, firms are likely to avoid destructive
competition, which raises costs and deprives potential profits, by not only forming alliances with
their competitors, but also increasing their level of cooperation in existing alliances. This
strategy enables firms to gain stronger market position, which finally enhances performance.
Hence, the second proposition may be stated as:
Proposition 2: The degree of cooperation in co-marketing alliances is positively
influenced by global competitive threats.
56
Global market uncertainty and co-marketing alliances
Drawing from transaction cost economics, the effects of external market uncertainty on
governance decisions are ambiguous (Rindfleisch and Heide, 1997). Since external uncertainty
makes it difficult to write an a priori comprehensive contract (Williamson, 1985), problems of
adapting to changes in an external market environment emerge (Williamson, 1991a). Such
adaptations usually incur high transaction costs, especially in cases where the degree of asset
specificity is high (Williamson, 1975). This indicates an interaction effect between asset
specificity and external market uncertainty—the argument posited in the original framework of
transaction cost economics. However, empirical studies in the past have failed to show
significant interaction effects between asset specificity and external uncertainty (e.g., Gatignon
and Anderson, 1988; Klein, Frazier, and Roth, 1990). These insignificant results suggest that an
investigation into the direct effect of external uncertainty may prove to be worthwhile. Hence,
this study proposes to examine the effect of global market uncertainty on degree of cooperation
in co-marketing alliances, which can be considered a mode governance structure (Tsang, 2000;
Williamson, 1991a).
Williamson (1991a) advances his transaction cost analysis by incorporating the hybrid
mode of governance, which falls in the middle of the market-hierarchy continuum. When market
uncertainty is high, hybrids are a viable choice of governance structure because they possess
stronger adaptive capabilities than hierarchies, yet provide more administrative control than
market transactions (Tsang, 2000). Given the high level of market uncertainty, changes become
increasingly unpredictable. Internalizing operations is not an appropriate alternative since
investments in specific assets usually incur high fixed costs, and such assets are difficult to adapt
to change. Relying on market transactions also deprives firms from having full control over the
57
operations. In this case, alliances enable firms to monitor possible opportunistic behaviors with
less costs than internalizing their operations, and gives more control than leaving the transactions
to be performed by the markets (Chen and Chen, 2003; Gulati, 1998; Jarillo, 1988; Kale, Singh,
and Perlmutter, 2000; Spekman, et al., 1998; Spekman and Sawhney, 1990; Young-Ybarra and
Wiersema, 1999). Since competing in global markets incurs huge fixed costs that make it
difficult for one firm to absorb alone, a firm needs to ally with others in order to share costs and
better serve customers worldwide (Ohmae, 1989b). Therefore, the third proposition may be
stated as:
Proposition 3: The degree of cooperation in co-marketing alliances is positively
influenced by global market uncertainty.
Co-marketing alliances and international marketing performance
Many researchers have postulated (and some have found) positive outcomes of alliances. For
instance, alliances enable firms to assess complementary resources, to develop new resources
and products, and to minimize global competition (Adler, 1966; Ireland, Hitt, and Vaidyanath,
2002; Robson and Dunk, 1999; Varadarajan and Rajaratnam, 1986). Thus, many studies propose
that such collaboration among firms should provide them with positive outcomes (e.g., Dyer,
1997; Madhok and Tallman, 1998). Some studies show positive performance consequences
from such alliances including, for example, Hausman (2001) and Sarkar, Echambadi and
Harrison (2001). The results from Hausman (2001) indicate that relationship strength, which is
composed of inter-firm trust, relationship commitment, and relationalism, is positively related to
firm performance. Sarkar et al. (2001) found that alliance proactiveness—the extent to which an
organization engages in identifying and responding to partnering opportunities—is positively
58
related to market-based performance. However, the direct relationship between firms’
cooperation in alliances and firm performance is not yet well established. Previous studies only
hypothesize that the degree of cooperation in alliances should have a positive relationship with
efficiency, profitability, and effective marketing activities (Anderson and Weitz, 1992; Lorange
and Ross, 1992), but such relationships have not been empirically tested.
The rationale for explaining the performance implications of alliances relies on the
market power perspective and transaction costs economics. Through inter-firm collaborations
such as alliances, firms gain a competitive market position and a competitive advantage which
ultimately yields higher performance (Burgers, Hill, and Kim, 1993; Dyer, 1997; Ireland, Hitt,
and Vaidyanath, 2002; Kogut, 1988; Ohmae, 1989b; Webster, 1992). Hence, this form of
organization is particularly crucial in managing firms and enhancing their performance,
especially in a globalized business environment (Ohmae, 1989b; Sheth and Sisodia, 1999;
Spekman and Sawhney, 1990; Webster, 1992). It is difficult to empirically establish the link
between alliances and firm performance because there are many activities apart from the mere
participation in alliances that contribute to the performance of each firm (Gulati, 1998).
Nonetheless, it is possible to relate the degree of the firm’s cooperation in the alliances to firm
performance and test the relationships between them.
One of the benefits of co-marketing alliances is to help firms strengthen their market
power and eliminate potential competition in a cost-effective manner (Bucklin and Sengupta,
1993; Das, Sen, and Sengupta, 2003). Thus, firms that wish to enhance their international
marketing performance are encouraged to form co-marketing alliances to jointly conduct
international marketing activities with other firms. International marketing performance is
defined here as marketing effectiveness and efficiency attained in international markets.
59
Building on the concept of marketing performance (Vorhies and Morgan, 2003), international
marketing performance refers to the extent to which an organization achieves more international
outcomes than the marketing resources allocated (i.e., efficiency) and the degree to which an
organization achieves its goals in international markets (i.e., effectiveness).
When an alliance is formed, the partner firms make collaborative efforts and share
resources in helping each other conduct international marketing activities and achieve higher
performance outcomes. Costs of performing international marketing activities are reduced due
to less competition among firms, and competitive advantage is then realized through cooperative
efforts of co-marketing alliances (Dyer, 1997; Ireland, Hitt, and Vaidyanath, 2002; Ohmae,
1989b; Webster, 1992). Previous literature on alliances suggest that potential benefits expected
from alliances include lower transaction costs, increased market power, shared risks and resource
accessibility (Gulati, Nohria, and Zaheer, 2000; Jarillo, 1989; Mowery, Oxley, and Silverman,
1996). Furthermore, prior research also recommends alliances as an important tool to help
internationalizing firms alleviate resource and capability shortages and achieve superior
performance (Jarillo, 1989; Zacharakis, 1997).
Some empirical studies indicating a positive alliance-performance relationship include,
for example, Lu and Beamish (2001) and Kaynak (2002). While Lu and Beamish studied
horizontal alliances, Kaynak studied vertical alliances. Performance of small-medium
enterprises is found to be positively related to the level of alliances (Lu and Beamish, 2001).
The supplier-buyer cooperation is also found to enhance firm performance (Kaynak, 2002).
Hence, success in international markets can be realized through participation in alliances in order
to acquire resources and capabilities necessary to cope with changes brought about by
60
globalization. Ultimately, firms’ international marketing performance can be enhanced through
increased cooperation in co-marketing alliances. As such, our last proposition may be stated as:
Proposition 4: The international marketing performance is positively influenced by the
degree of co-marketing alliance.
In sum, we propose that global market opportunities will undermine the degree of firms’
cooperation in co-marketing alliances. Nonetheless, global market threats will drive more
cooperation. Such cooperation is hypothesized to enhance firms’ international marketing
performance.
Theoretical contributions
This paper contributes to both international business and marketing literature by linking
globalization effects to firms’ marketing conduct (i.e., cooperation in co-marketing alliance) and
performance in international markets. We aim to fill the gap in existing marketing and
international business literature. In our framework, we propose that marketing collaboration
provides an effective means to help firms manage globalization effects. Co-marketing alliances
are treated here as marketing strategy that enables firms to cope with changes in the business
environment led by globalization, and achieve superior marketing performance in international
markets. Since past business research has paid little attention to issues related to the degree of
firms’ cooperation in alliances, we attempt to explore, in particular, how such cooperation helps
firms navigate successfully through this new competitive landscape.
It is believed that this research makes significant contributions to the literature on
globalization, alliances, and performance implications on allying firms. The application of the
61
two complementary theories—transaction costs economics and market power perspective—to
explain the relationships among globalization effects, degree of cooperation in co-marketing
alliance and international marketing performance helps expand the application of these two
theories. Since these two theories have different emphases, applying both of these two theories
helps us gain a more complete picture of 1) the rationales behind the degree of cooperation in comarketing alliances, and 2) the performance implications of allying firms. While transaction cost
economics focuses on governance structure that minimize a firm’s transaction costs, the market
power perspective focuses on the reduction of competition to gain market control.
Based on these two theoretical perspectives, each effect of globalization is proposed to
have different relationships with the degree of cooperation in co-marketing alliances in the
international marketing activities of firms. Since a single theory seems insufficient to explain
this complex phenomenon, such as the effects of globalization on business, the application of
these two complementary theories helps us gain better insights on such effects.
Moreover, the application of these two theories to explain the unexplored phenomenon of
globalization expands the body of knowledge in both international business and marketing
literatures. This paper applies key concepts of transaction costs economics—uncertainty,
bounded rationality, and opportunism—in relating two effects of globalization to the degree of
cooperation in co-marketing alliances. It also employs the market power rationale to explain the
relationship between global competitive threats and the degree of cooperation in co-marketing
alliances.
62
Managerial implications
To business practitioners, this study illustrates the significant roles of co-marketing alliances in
enhancing the international marketing performance of firms in the context of globalization. It
identifies the impact that each globalization effect has on the degree of cooperation in comarketing alliances, and indicates the performance implications of such cooperation on firms
engaging in international activities. Since globalization presents both opportunities and threats,
managers need to recognize how such opportunities and threats may affect their firms’ marketing
and business practices. From this study, managers can gain a better understanding of how
globalization may affect their firms’ cooperation in alliances, which in turn affects performance.
In today’s global economy, firms are trying to gain competitive advantages that strengthen their
market position and ensure their long-term success. By increasing firms’ collaboration in comarketing alliances, firms may enhance their international marketing performance since such
alliances enable firms to create stronger market position and reduce potential competition and
uncertainty.
This study also shows that globalization effects do not have the same impact on firms.
While more global market opportunities may lower the degree of firms’ cooperation in comarketing alliances, higher global market threats tend to increase such cooperation. We point
out that such alliance cooperation may eventually improve firms’ international marketing
performance. The BP-Mobil co-marketing alliance is a good example of an effective
collaborative venture that fosters symbiotic growth opportunity amid globalization. Unless
managers understand the significance of these issues, proper strategies regarding inter-firm
collaboration cannot be successfully implemented.
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Suggestions for future research
The propositions put forth in this study need to be empirically tested. The roles of other
related factors such as the levels of trust and commitment in the co-marketing alliances that are
not incorporated into this research should be investigated. As stated in Dyer (1997), the
transaction costs of the firms vary based on the choice of safeguarding mechanisms used. Lower
transaction costs can be realized due to 1) higher commitment between exchange partners, 2)
higher economies of scale and scope of exchange relationships, 3) higher inter-firm information
sharing, 4) higher reliance on “self-enforcing safeguards,” namely goodwill, trust, financial
hostages, and 5) higher level of investments in co-specialized assets (Dyer, 1997). Since levels
of trust and commitment may affect the degree of cooperation and satisfaction of each partner, it
may be interesting to explore this issue in the future.
Other research avenues may include comparative studies of differences in the degree of
co-marketing alliances and their performance implications between firms from emerging markets
and those from developed economies, and among emerging economies themselves. Although
most emerging economies appear to possess similar characteristics, they tend to differ in various
ways, e.g., political regimes, levels of economic development, and managerial styles. Moreover,
empirical studies of firms in different emerging markets are scarce. Thus, studies comparing
firms from different emerging economies are worth exploring in the future.
Conclusion
This study is one of the early attempts to propose a conceptual framework to investigate
globalization effects at the firm level. It explores how firms with international activities can
enhance their performance in the global marketplace, and proposes that superior international
64
marketing performance of such firms can partially be attributed to the degree of cooperation in
co-marketing alliances. As suggested by the classical industrial organization—the market power
perspective—firms form alliances to reduce competition. Faced with global competitive threats,
firms need to be equipped with all necessary resources, which are usually not present in a firm,
but can be obtained by forming alliances with other firms. Building on transaction cost
economics, increasing the degree of cooperation in co-marketing alliances may be a viable
option for firms facing global market uncertainty because hybrid governance structures possess
stronger adaptive capabilities than hierarchies, yet provide more administrative control than
market transactions. Therefore, this study hypothesizes that firms tend to increase their
cooperation in co-marketing alliances due to perceived global market threats. Less cooperation
in such alliances can be expected due to perceived abundant global market opportunities. Given
such opportunities, firms tend to conduct business on their own to avoid potential opportunistic
behaviors, arising from bounded rationality and behavioral uncertainty.
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CHAPTER FOUR
THE EFFECTS OF GLOBALIZATION ON CO-MARKETING ALLIANCES AND
FIRM PERFORMANCE: AN EMPIRICAL STUDY
Introduction
In the past two decades, we have witnessed dramatic changes in the business environment that
has caused shifts in business conduct and marketing activities of firms around the world. The
world has gone through the process of globalization, i.e., increasing social and cultural interconnectedness, political interdependence, and economic, financial and market integrations (Eden
and Lenway, 2001; Giddens, 1990; Orozco, 2002). Multinational enterprises (MNEs), the major
agents and beneficiaries of this phenomenon (Eden and Lenway, 2001; Ghemawat, 2003;
Rugman and Verbeke, 2004), are inevitably being affected by the process.
Many forms of organizational restructuring (such as downsizing, reengineering, and
implementation of cooperative strategies) have been witnessed as responses to globalization
(Jones, 2002). Among various forms of business restructuring, alliance formation is considered
the most remarkable business trend in the past two decades (Hwang and Burgers, 1997; Kasmai
and Iijima, 2002). Nonetheless, empirical studies that investigate how globalization actually
affects firms’ cooperation in alliances, and how such cooperation ultimately enhances their
performance are scarce.
As suggested by many international business scholars (e.g., Clougherty, 2001; Eden and
Lenway, 2001; Young, 2001), the effects of globalization on firms remain unexplored. Thus, we
hope to advance current literature on the rationale for alliance cooperation and performance of
allying firms. Since superior marketing is a sustainable source of unique competitive advantage
in this new competitive terrain, firms should focus on building such advantage (Webster, 1992).
Given that inter-firm cooperation in international marketing activities enables firms to achieve
66
superior marketing, it is our emphasis here to investigate whether such cooperation is crucial to
firms’ marketing performance. The two research questions of this study are: 1) Does
globalization affect the degree of cooperation in co-marketing alliances? and 2) Do co-marketing
alliances influence firms’ international marketing performance? To answer these research
questions, this study investigates the relationship between two major effects of globalization—
global market opportunities and global market threats—and the degree of cooperation in comarketing alliances. In addition, the influence of the degree of cooperation on a firm’s
international marketing performance is also examined.
A Review of literature on globalization effects and co-marketing alliances
Globalization effects
Since the 1980s, the liberalization of world trade and capital markets led by globalization has
created a new and challenging competitive arena for all firms (Nolan and Zhang, 2003). Several
changes in the business environment arising from this trend are, for instance, convergence of
consumers’ demend (Fram and Ajami, 1994; Levitt, 1983; Ohmae, 1989a), expansion in
international business transactions (Deardorff and Stern, 2002; Fawcett, Calantone, and Smith,
1997; Fawcett and Closs, 1993), and the emergence of global markets for goods, services, labor
and capital (Deardorff and Stern, 2002; Hansen, 2002). Although, such integration of markets
and factors of production is still far less perfect than expected by economists (Ghemawat, 2003),
it is undeniably significant. Therefore, it is interesting to study how these changes affect firms.
The aforementioned trends have resulted in two major effects of globalization, global
market opportunities and global market threats (Contractor and Lorange, 1988; Fawcett and
Closs, 1993; Ohmae, 1989b; Perlmutter and Heenan, 1986; Sanchez, 1997; Shocker, Srivastava,
67
and Ruekert, 1994). These effects are chosen to be investigated here because they are frequently
cited in the past literature as the most apparent and immediate effects of globalization (e.g.,
Fawcett, Calantone, and Smith, 1997; Fawcett and Closs, 1993; Hafsi, 2002; Jones, 2002).
Moreover, while globalization increases market opportunities, it also raises the level of threats
faced by firms. Hence, it is interesting to explore these two contrasting effects on firms’
marketing activities.
Global market opportunities
Developments in information technologies, privatization, and deregulation of trade and
investment policies have offered tremendous opportunities to firms seeking to expand
internationally (Scully and Fawcett, 1994). Such expansions in market potential, trade and
investment potential and resource availability and accessibility resulting from globalization are
refered to as global market opportunities (Contractor and Lorange, 1988; Fawcett and Closs,
1993; Jones, 2002; Levitt, 1983). Firms can access not only new markets but also lower-cost
inputs by relocating their operations and exploiting cheap resources around the world (Czuchry
and Yasin, 2001). These enormous opportunities have eventually fostered rapid growth in
various economic sectors in many regions around the world (Graham, 1996). A large volume of
cross-border flows of trade, investment, technology, etc. during the1990s and early 2000s
(UNCTAD, 2003) is excellent evidence of increasing opportunities driven by globalization.
Global market threats
Globalization brings along global market threats, which can be further categorized into 1) global
competitive threats and 2) global market uncertainty. Global competitive threats are defined as
68
the intensified competition in global markets resulting from larger number of competitors in the
global marketplace (D’Aveni, 1994; Hafsi, 2002). Trade liberalization, technological
developments, and convergence of governmental macroeconomic policies associated with
globalization have made it easy for firms around the globe to enter different geographic markets,
thus, intensifying the competitive atmosphere for firms around the world (Hafsi, 2002; Harvey
and Novicevic, 2002). Globalization has radically changed the competitive terrain faced by
firms from both developed and emerging economies (Nolan and Zhang, 2003; Scully and
Fawcett, 1994). Firms operating at different levels—domestic, regional, international and
global—are now competing against one another. Hence, it is obvious that globalization has
brought about a new competitive landscape referred to as “hypercompetitive markets” (Hitt,
Keats, and DeMarie, 1998, 24), one that presents enormous threats to firms in every economic
sector since it makes a firm’s relative competitive advantage very time-sensitive (Harvey and
Novicevic, 2002).
Together with higher competition, another threat posed by globalization is global market
uncertainty—the increasing complexity and demand uncertainty in the market (Burgers, Hill, and
Kim, 1993; Chimerine, 1997; Courtney, 2001; Oxelheim and Wihlborg, 1991). Such uncertainty
has caused difficulties in firm’s decision making and planning processes (Chimerine, 1997; Hitt,
Keats, and DeMarie, 1998). Due to rapid technological changes and a growing number of firms
now participating in the global marketplace, forecasting demands and/or competitors’ responses
has become increasingly difficult. This has enabled consumers to shift between producers,
making demand become less predictable and uncertain (Chimerine, 1997).
In sum, while opportunities can arise from globalization, competition and uncertainty are
unavoidable. As a result, firms need to formulate strategies that allow them to gain competitive
69
advantage and cope with globalization effects. Among different strategies implemented by firms
in response to such inevitable changes in global marketplace, collaboration among firms appears
to be the most popular and viable strategy because it enables firms to reduce competition and
uncertainty while better capitalizing on opportunities (Contractor and Lorange, 1988; Hitt, Keats,
and DeMarie, 1998; Ohmae, 1989b; Perlmutter and Heenan, 1986).
Co-marketing alliances
Co-marketing alliances, a specific type of strategic alliance, is one kind of business-level
competitive strategy—horizontal complementary strategic alliance—whose primary focus is on
creating a competitive advantage in specific product markets by pooling resources and
capabilities of firms at the same stage of the value chain. The scope of co-marketing alliances is
limited to marketing activities such as customer service, marketing, promotion, and distribution
(Bucklin and Sengupta, 1993; Das, Sen, and Sengupta, 2003; Varadarajan and Cunningham,
1995). Unlike other types of strategic alliances, co-marketing alliances are mainly designed to
help partners coordinate marketing activities with an objective of fulfilling customers’ needs
(Bucklin and Sengupta, 1993; Das, Sen, and Sengupta, 2003). Since marketing has obviously
become an important factor that helps firms achieve a competitive advantage, this type of
alliances is emphasized here.
As mentioned in Webster (1994, 8), “in the global markets of the 1990s and beyond,
superior marketing will be a more sustainable source of unique competitive advantage than
superior technology.” Customer satisfaction is then the key to this success (Webster, 1994). In
order to serve customers more successfully in the globalization era, firms need to ally with other
firms since it is difficult or even impossible for one firm to do everything quickly, effectively,
70
and efficiently due to high competition and uncertainty in the markets (Ohmae, 1989b). Thus,
co-marketing alliances then become a significant tool to help firms satisfy customers, stay on the
competitive edge, and gain market power in the global marketplace.
Theoretical framework and hypotheses
To gain a better understanding of the relationships between globalization effects and the degree
of cooperation in co-marketing alliance of firms, the present study applies two theoretical
perspectives—transaction cost economics and market power perspective—to explain the
phenomenon. While transaction cost economics explains why cooperation among firms provides
them with efficiency, the market power perspective focuses on gaining market control through
competitive collaboration. Thus, combining these two perspectives gives us a more complete
explanation of the phenomenon.
Transaction cost economics
Bounded rationality and opportunism are two key behavioral assumptions underlying transaction
cost economics (Rindfleisch and Heide, 1997; Williamson, 1981). Bounded rationality indicates
human limited ability in processing information, and opportunism refers to “self-interest seeking
with guile” (Williamson, 1975, 6). Due to bounded rationality, opportunism, uncertainty,
frequency of transactions, small-number bargaining, and degree of assets specificity, hazards in
transactions are introduced (Rindfleisch and Heide, 1997; Williamson, 1991a, b). As a result,
certain safeguarding mechanisms must be employed in order to control such hazards, and thus
increase the costs of the transactions (Kogut, 1988; Rindfleisch and Heide, 1997).
71
Alliances enable firms to monitor possible opportunistic behaviors with less costs than
internalizing their operations and gives them more control than leaving the transactions to be
performed by the markets (Chen and Chen, 2003; Gulati, 1998; Jarillo, 1988; Kale, Singh, and
Perlmutter, 2000; Spekman, et al., 1998; Tsang, 2000). This is especially true when firms are
faced with high levels of competition and market uncertainty.
Since competing in global markets incurs huge fixed costs that make it difficult for one
firm to absorb alone, a firm needs to ally with others in order to share costs and to better serve
customers worldwide (Ohmae, 1989b). Therefore, transaction cost economics considers forming
alliances as a strategy that helps firms expand their strategic capabilities (Burgers, Hill, and Kim,
1993). In addition to cost considerations, alliances also help firms reduce potential competition.
This notion is consistent with the market power perspective, which will be briefly discussed next.
Market power perspective
Building on the market power perspective (Kogut, 1988), alliances provide a means to reduce
competition and minimize uncertainty evoked by globalization (Burgers, Hill, and Kim, 1993;
Gulati and Singh, 1998; Kale, Dyer, and Singh, 2002). Through alliances, firms can increase
their market power in order to gain a competitive position in their market (Bucklin and Sengupta,
1993; Kogut, 1988). Hence, this perspective views alliances as a strategy to help firms reduce
competition. Building on these two theoretical frameworks, the next section discusses the
hypothesized relationships and the conceptual model illustrated in Figure 4.1.
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Figure 4. 1
Model of Globalization Effects, Cooperation, and International Marketing Performance
Global Market
Opportunities
Global Competitive
Threats
Global Market
Uncertainty
H1
H2
Cooperation in
Co-Marketing
Alliance
H4
International
Marketing
Performance
H3
Control Variables
- Relational Embeddedness
- Firm Age
- Firm’s International
Experience
Model and hypotheses
Global market opportunities and co-marketing alliances
According to transaction cost economics (Williamson, 1975, 1979, 1981, 1991a, b), firms will
choose the most efficient governance mechanism. Due to increasing global market
opportunities, resources and markets are more easily accessible; thus, lowering the costs of
transactions (Fawcett and Closs, 1993; Levitt, 1983; Peterson, Welch, and Liesch, 2002).
Therefore, firms perceiving ample market opportunities resulting from globalization tend to be
reluctant to increase their degree of cooperation in their existing alliances since the costs arising
from opportunistic behaviors might outweigh the potential benefits expected from cooperative
arrangements (Heide, 1994; Heide and John, 1990; White, 2000). When there is more than one
party involved in a transaction, there exists behavioral uncertainty. This is the uncertainty
73
arising from the difficulties regarding performance evaluation of parties involved in the
transaction (Rindfleisch and Heide, 1997; Williamson, 1985).
In the case of increasing global market opportunities, it becomes more difficult to
evaluate the performance of the allying partners due to the bounded rationality condition—the
limited ability to process all information—and information asymmetry. Therefore, internalizing
the firms’ operations may prove to be the most cost-effective means of governance structure
(Williamson, 1985). Since globalization provides more opportunities for firms to conduct most
of their transactions more efficiently within their organizations (Peterson, Welch, and Liesch,
2002), firms are more likely to internalize their international marketing activities and less likely
to cooperate with other firms in their co-marketing alliances. Since we are interested in the
degree of cooperation in international marketing activities among exporting firms, the degree of
cooperation in co-marketing alliances is defined as the extent to which a firm cooperates with
other firms in the alliance to coordinate international marketing activities such as customer
service, advertising, promotion, and sharing distribution channels. Hence, the first hypothesis
for this study can be stated as:
Hypothesis 1: The degree of cooperation in co-marketing alliances is negatively
influenced by global market opportunities.
Global competitive threats and co-marketing alliances
In order to cope with increasing global competitive threats, firms tend to form alliances (Ireland,
Hitt, and Vaidyanath, 2002; Rindfleisch and Moorman, 2001; Sheth and Sisodia, 1999). Based
on the classical industrial organization—the market power perspective—reducing competition is
a means to create and strengthen a firm’s market power (Burgers, Hill, and Kim, 1993; Kogut,
74
1988). Firms cooperate instead of compete with one another to gain stronger market power and
competitive market position. Collaborating with other firms not only alleviates competition and
improves their competitive position in the market, but also helps them avoid potential costs
resulting from intensified competition (Contractor and Lorange, 1988; Gulati, 1998; Kale, Dyer,
and Singh, 2002).
Furthermore, since globalization inhibits firms from possessing all necessary resources to
compete effectively and efficiently in many markets (Ariño and Torre, 1998; Ohmae, 1989b),
many firms have formed co-marketing alliances with other firms that possess complementary
resources. Alliances enable firms to leverage their unique skills and combine their specialized
resources to build competitive advantages, which help them gain stronger market position and
succeed in global markets (Adler, 1966; Bucklin and Sengupta, 1993; Ireland, Hitt, and
Vaidyanath, 2002). In addition, cooperative arrangements such as alliances are considered one
of the effective means to manage global competitive threats brought about by globalization
(Hamel, 1991; Kasmai and Iijima, 2002; Perlmutter and Heenan, 1986).
Given such intensified competition in global markets, firms are likely to avoid destructive
competition, which raises costs and deprives potential profits, by not only forming alliances with
their competitors, but also increasing their level of cooperation in existing alliances. In doing so,
it enables firms to gain stronger market position, which finally enhances performance.
Therefore, our second hypothesis can be stated as:
Hypothesis 2: The degree of cooperation in co-marketing alliances is positively
influenced by global competitive threats.
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Global market uncertainty and co-marketing alliances
Drawing from transaction cost economics, the effects of external market uncertainty on
governance decisions are ambiguous (Rindfleisch and Heide, 1997). Since external uncertainty
makes it difficult to write an a priori comprehensive contract (Williamson, 1985), the problems
of adapting to changes in an external market environment emerge (Williamson, 1991a). Such
adaptations usually incur high transaction costs, especially in cases where the degree of asset
specificity is high (Williamson, 1975). This indicates an interaction effect between asset
specificity and external market uncertainty
However, empirical studies in the past have failed to show significant interaction effects
between asset specificity and external uncertainty (e.g., Gatignon and Anderson, 1988; Klein,
Frazier, and Roth, 1990). These insignificant results suggest that an investigation into the direct
effect of external uncertainty may prove to be worthwhile. Thus, we propose to examine the
effect of global market uncertainty on degree of cooperation in co-marketing alliances, which
can be considered a hybrid mode governance structure (Tsang, 2000; Williamson, 1991a).
Williamson (1991a) advances his transaction cost analysis by incorporating the hybrid
mode of governance, which falls in the middle of the market-hierarchy continuum. When market
uncertainty is high, hybrids are a viable choice of governance structure because they possess
stronger adaptive capabilities than hierarchies, yet provide more administrative control than
market transactions (Tsang, 2000). Given the high level of market uncertainty, changes become
increasingly unpredictable.
On one extreme, internalizing operations is not an appropriate alternative since
investments in specific assets usually incur high fixed costs, and such assets are difficult to adapt
to change or other usages. On the other extreme, relying on market transactions also deprives
76
firms from having full control over operations. In this case, alliances enable firms to monitor
possible opportunistic behaviors with less costs than internalizing their operations, and giving
more control than leaving the transactions to be performed by the markets (Chen and Chen,
2003; Gulati, 1998; Jarillo, 1988; Kale, Singh, and Perlmutter, 2000; Spekman, et al., 1998;
Spekman and Sawhney, 1990; Young-Ybarra and Wiersema, 1999). Since competing in global
markets incurs huge fixed costs that make it difficult for one firm to absorb alone, a firm needs to
ally with others in order to share costs and better serve customers worldwide (Ohmae, 1989b).
Therefore, the third hypothesis of this study can be stated as:
Hypothesis 3: The degree of cooperation in co-marketing alliances is positively
influenced by global market uncertainty.
Co-marketing alliances and international marketing performance
One of the benefits of co-marketing alliances is to help firms strengthen their market power and
eliminate potential competition in a cost-effective manner (Bucklin and Sengupta, 1993; Das,
Sen, and Sengupta, 2003). Thus, firms that wish to enhance their international marketing
performance are encouraged to form co-marketing alliances to jointly conduct international
marketing activities with other firms. International marketing performance is defined here as the
extent to which an organization achieves more international outcomes than the marketing
resources allocated (i.e., efficiency) and the degree to which an organization achieves its goals in
international markets (i.e., effectiveness).
When an alliance is formed, the partner firms make collaborative efforts and share
resources in helping each other conduct international marketing activities and achieve higher
performance outcomes. Costs of performing international marketing activities are reduced due
77
to less competition among firms, and competitive advantage is then realized through cooperative
efforts of co-marketing alliances (Dyer, 1997; Ireland, Hitt, and Vaidyanath, 2002; Ohmae,
1989b; Webster, 1992). Other potential benefits expected from alliances include lower
transaction costs, increased market power, shared risks and resource accessibility (Gulati,
Nohria, and Zaheer, 2000; Jarillo, 1989; Mowery, Oxley, and Silverman, 1996). Furthermore,
alliances are recommended as an important tool in firm internationalization since they help firms
alleviate resource and capability shortages and achieve superior performance (Jarillo, 1989;
Zacharakis, 1997).
Hence, success in international markets can be realized through participation in alliances
in order to acquire resources and capabilities necessary to cope with changes arising from
globalization. Ultimately, the international marketing performance of firms can be enhanced
through increased cooperation in co-marketing alliances. As such, the next hypothesis can be
stated as:
Hypothesis 4: International marketing performance is positively influenced by the degree
of co-marketing alliance.
Research context
Thailand and the U.S. provide contrasting research contexts due to differences in their degree of
globalization (Foreign Policy, 2001, 2003), level of economic development, and national
competitiveness (Porter, et al., 2000; Porter and Schwab, 2003). While the U.S. is highly
globalized, Thailand is considerably less globalized. According to a survey conducted by AT
Kearney and EDS Company in cooperation with Foreign Policy Magazine (2004), Thailand is
ranked 48th, and the U.S. is ranked 7th on the globalization index, which consists of indicators
78
such as trade and financial flows, movement of people across borders, international telephone
traffic, Internet usage, and participation in international treaties and peacekeeping operations.
Thailand is classified as a lower-middle-income economy, one in which the Gross
National Income (GNI) per capita is between $736 and $2,935, while the U.S. is considered a
high-income-economy whose GNI per capita is above $9,076 (The World Bank Group, 2003).
Furthermore, the national competitiveness of these two nations differs dramatically. The U.S. is
the second most competitive country in the world whereas Thailand is ranked number 40 on the
national competitiveness index (Porter and Schwab, 2003). Given that these two countries are
different in many aspects, it is worthwhile to examine the generalizabilty of relationships among
globalization effects, degree of cooperation in co-marketing alliances and international
marketing performance across countries.
Research method
Sample
Our sample was drawn from the electronics and chemical industries, which consist of a large
number of exporters in both Thailand and the U.S. These two industries are export-oriented in
both countries due to lower manufacturing costs in Thailand and more advanced technology in
the U.S. In Thailand, firms were identified from two sources: 1) The Export-Import Bank,
Thailand (2001) and 2) The Department of Export Promotion, Thailand (2003). These two
sources are reliable and legitimate because they represent the authorities that oversee and support
exporters in Thailand. Therefore, these sources provide the most complete set of exporting firms
in Thailand classified by industries. A total of 1,050 firms (450 electronic exporters; 600
chemical and pharmaceutical exporters) are included in the sampling frame.
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The sample in the U.S. consists of firms in manufacturing sectors having the first three
digits of the North American Industry Classification System (NAICS) of 334- and 325-. Lists of
qualified firms were obtained from Harris InfoSource’s (2001) database and Ward’s Business
Directory of U.S. Private and Public Companies by Gale Group (2001). We relied on these two
directories because they classify firms based on the NAICS and provide information regarding a
firms’ export, necessary information for this study. Therefore, we randomly selected our
samples from these lists. This yielded the final sample size of 692 U.S. exporters.
Survey design and data collection
The main research instrument in this study was a questionnaire. Questions were initially
developed in English and revised after discussing with fifteen experts and managers and a pretest
with twenty firms. It was then translated into Thai and back-translated by two independent
bilinguals using the method suggested by Douglas and Craig (1983). This involved original
translation, back-translation, and extensive refinements until the translated instruments possessed
both conceptual and functional equivalences (Cavusgil and Das, 1997; Green and White, 1982;
Mintu, Calantone, and Gassenheimer, 1994).
The key informant technique (Campbell, 1955) was used to collect data. This technique
has been successfully adopted in many studies of strategic alliances (e.g., Bucklin and Sengupta,
1993; Lamb, Spekman, and Hunt, 2002; Rindfleisch and Moorman, 2001; Young-Ybarra, 1999,
etc.). The targeted key informants included the presidents, owners, and middle-level managers
(general managers or marketing managers) who are typically top decision makers of the firms
and are most knowledgeable about the firms’ overall activities.
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The questionnaires were mailed to 1,050 and 692 firms in Thailand and the U.S.,
respectively. In both countries, three waves of mailings were sent to the key informants in our
sampling frame. In addition, a telephone follow-up was conducted one week after each of the
mailings to request and encourage participation. After eliminating undelivered mail and firms
that are no longer exporting or out of business, the total valid mailings were 767 in Thailand and
359 in the U.S.
A total of 223 completed surveys were returned, and 208 were usable. Among 58
completed questionnaires in the U.S., 36 firms (62%) participate in co-marketing alliances. A
total of 48 out of 150 firms (32%) in Thailand participate in co-marketing alliances. Given the
proportion of firms engaging in co-marketing alliances, it is obvious that U.S. firms tend to be
more cooperative than Thai firms. The response rates in the U.S. and Thailand are 17% and
21%, respectively. The overall response rate from the survey is 20%.
Non-response bias analysis
We used two methods to estimate non-response bias. The first approach involves dividing
responses into early and late response groups on the basis of their arrival dates (Armstrong and
Overton, 1977) while the second approach requires a random and equal split of responses. Then,
a comparison of differences in the mean of responses between early and late groups and between
two equally and randomly split groups can be conducted along key constructs of the study. Such
comparison is considered a valid test of non-response bias as documented and practiced by a
volume of studies (e.g., Li and Calantone, 1998; Wu, Mahajan, and Balasubramanian, 2004).
Hence, the questionnaires of two countries were initially divided into two groups based
on their arrival dates. The first group of responses, the early response group, consisted of
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questionnaires received during the first four weeks of the survey period. Questionnaires received
afterwards were considered late responses. The early response group included 119 firms (90
from Thailand and 29 from the U.S.) or 57 percent of total valid replied mails. The remaining 89
firms (60 from Thailand and 29 from the U.S.) were grouped as late responses, and this
accounted for 43 percent of the total responses. Next, the questionnaires were categorized
randomly into two equal groups. Following this approach, two data groups with an equal
number of responses (i.e., 104) were generated. The means of the major constructs in this study
were compared in both groupings, and no significant differences were found (see Appendix A
for details). Thus, we can conclude that non-response is not an issue here.
Measures
The samples of items used to measure key constructs in this study and the sources of the scales
are summarized in the Appendix B. The following section discusses all the measures in detail.
Dependent variable: International marketing performance
International marketing performance is the extent to which an organization achieves 1) more
international marketing outcomes than the resources allocated to overseas marketing activities
(efficiency) and 2) organizational goals in international markets (effectiveness). Both of these
concepts are adopted from Vorhies and Morgan (2003). The scale to measure international
marketing performance is composed of items reflecting both efficiency and effectiveness in
international markets.
Although efficiency is usually assessed using secondary data, e.g., the ratio of marketing
and selling expenses to the firm’s gross operating revenue (Vorhies and Morgan, 2003), this
study proposes to use perceptual measures of international marketing efficiency for two reasons.
82
First, past studies indicate that both perceptual and objective measures of performance yield
consistent results (Dess and Robinson, 1984; Hart and Banbury, 1994; Naman and Slevin, 1993;
Pearch, Robbins, and Robinson, 1987). Next, the secondary financial data indicating the
expenses and revenues of firms from emerging markets are either unavailable or difficult to
obtain due to the size and non-public nature of their businesses (Sapienza, Smith, and Gannon,
1988). The three-item perceptual measure of international marketing efficiency was generated
based on the definition of the marketing efficiency construct conceptualized by Vorhies and
Morgan (2003). The other three items that were used to measure international marketing
performance reflect international marketing effectiveness. All items were rated on a seven-point
scale.
Globalization effects
Global market opportunities are defined as the increases in market potential, trade and
investment potential and resource accessibility resulting from globalization. Global market
threats can be further categorized into 1) global competitive threats and 2) global market
uncertainty. Global competitive threats refer to the intensified competition in global markets
resulting from a larger number of competitors in the global marketplace. Global market
uncertainty is defined as the increasing complexity and demand uncertainty in the market.
Based on these dimensions of globalization effects, measurement items were generated
based on past literature (Archibugi and Michie, 1995, 1997; Fawcett, Calantone, and Smith,
1997; Fawcett and Closs, 1993; Fram and Ajami, 1994; Levitt, 1983; Morrissey and Filatotchev,
2000; Ohmae, 1989a; Zou and Cavusgil, 2002). All items were rated on seven-point Likert
83
scale. Global market opportunities were measured using six items. Global competitive threats
and global market uncertainty were measured using two and three items, respectively.
Degree of cooperation in co-marketing alliance
In this paper, the degree of co-marketing alliance is defined as the extent to which a firm
cooperates with other firms participating in the alliance in coordinating some marketing
activities. Formative indicators were used to measure this construct. Each of these indicators
reflects different types of international marketing activities that can be jointly completed by two
or more organizations which operate at the same level in the value-added chain (Bucklin and
Sengupta, 1993). We generated items based on past literature (Bucklin and Sengupta, 1993;
Kotler, 1991; Varadarajan and Rajaratnam, 1986).
As such, a fourteen-item seven-point scale
(1 = no cooperation 0% to 7= cooperation most of the time 80-100%) was designed to measure
the construct.
Control Variables
Relational embeddedness.
Relational embeddedness refers to the degree of reciprocity and closeness among alliance
participants (Rindfleisch and Moorman, 2001). Past studies (e.g., Gulati, 1998; Hansen, 1999;
and Uzzi, 1999) suggest that high levels of cooperation are present in alliances with a high
degree of relational embeddedness. Hence, relational embeddedness needs to be controlled in
order for this study to capture the effects of globalization on the degree of cooperation in comarketing alliances. The scale to measure relational embeddedness is adopted from Rindfleisch
and Moorman (2001). The construct was measured by a four-item seven-point Likert scale.
84
Firm age
Past studies show that firm age tends to affect firm performance since older firms are likely to
have accumulated greater stocks of resources over time (Mohan-Neill, 1995; Pett and Wolff,
2003). These stocks of resources are important to help firms successfully manage challenges,
especially in their internationalization (Mohan-Neill, 1995). Therefore, we included firm age as
one of the control variables in order to capture the effect of degree of cooperation in comarketing alliances on international marketing performance of firms. A single self-reported item
was used to measure this variable.
Firm international experience.
According to Shrader (2001), international experience of a firm—defined as the number of years
a firm has been involved in international markets—may have influenced its performance. Since
international experience was found to be a crucial factor in helping firms manage international
challenges and achieve superior performance (Aulakh, Kotabe, and Teegen, 2000; Pett and
Wolff, 2003; Rueuber and Fischer, 1997), we included this variable as a control variable in our
study. This variable is measured using one self-reported item.
Measure development and validation
General measurement approach
Given the scarcity of prior empirical research, the scale to measure the effects of globalization
was newly generated. Since observed variables were manifestations of underlying construct,
reflective measures were used to assess the constructs of interest in this study (Bagozzi and
Baumgartner, 1994). Therefore, a confirmatory factor analysis by means of AMOS 4.01
85
(Arbuckle, 1999) was used to assess the psychometric properties of the scales to validate the
measures (Anderson and Gerbing, 1988; Fornell and Larcker, 1981). AMOS is a new structural
equation modeling program that has recently gained popularity among academic scholars.
For a formative scale measuring the degree of cooperation in co-marketing alliances, the
content validity of the measures provides the major validation tool (Howell, 1987). Interviews
and pre-testing of the scale items provide evidence of content validity. This procedure of
assessing formative scales has been widely practiced in business literature (Homburg, Hoyer, and
Fassnacht, 2002; Johnson, Sohi, and Grewal, 2004).
Scale assessment
Table 4.1 provides a summary of our scale assessment. The chi-square (χ2) of the measurement
model was 289.41 (degree of freedom = 215). The comparative fit index (CFI), incremental fit
index (IFI), and non-normed fit index (NNFI) were .95, .97, and .95, respectively. These fit
indices of above .90 are considered acceptable (Bentler, 1992; Byrne, 2001; Diamantopoulos and
Siguaw, 2000; Jöreskog and Sörbom, 1993). Root mean square of error approximation
(RMSEA) was .065 with a very narrow 90% confidence interval (i.e., upper RMSEA = .083 and
lower RMSEA = .044), which shows the precision of this index to reflect a model fit in the
population (McCallum, Browne, and Sugawara, 1996).
Squared multiple correlation (R2), Cronbach alpha and composite reliability (ρc) were
used to assess construct reliabilities. Every indicator was a reliable measure of its designated
construct since each squared multiple correlation was substantial, i.e., greater than 0.5
(Diamantopoulos and Siguaw, 2000). All Cronbach alphas were greater than 0.7, the minimum
86
acceptable level suggested by Nunnally and Bernstein (1994). In addiion, all composite
reliabilities exceeded 0.6, the benchmark recommended by Bagozzi and Yi (1988).
Table 4. 1
Factor Loadings (λ), Squared Multiple Correlation (R2), Composite Reliability (ρ
ρc), and
Cronbach Alpha (α)
Thailand
Items
λ
R2
GMO1
GMO2
GMO3
GMO4
GMO5
GMO6
0.787
0.877
0.818
0.854
0.784
0.605
0.620
0.769
0.670
0.730
0.615
0.533
GCT1
GCT2
0.912
0.865
GMU1
GMU2
GMU3
The U.S.
α
λ
R2
0.86
0.91
0.924
0.737
0.840
0.900
0.915
0.745
0.853
0.543
0.706
0.810
0.837
0.555
0.831
0.748
0.83
0.88
0.921
0.988
0.790
0.687
0.574
0.623
0.501
0.530
0.60
0.73
REM1
REM2
REM3
REM4
REM5
REM6
0.763
0.868
-0.611
0.798
0.903
0.879
0.582
0.754
0.503
0.636
0.815
0.773
0.82
EFC1
EFC2
EFC3
0.926
0.930
0.739
0.858
0.866
0.546
0.87
ρc
Total
α
λ
R2
ρc
α
0.94
0.87
0.828
0.829
0.824
0.873
0.836
0.677
0.685
0.687
0.679
0.762
0.700
0.548
0.86
0.92
0.847
0.977
0.95
0.87
0.892
0.952
0.796
0.906
0.84
0.92
0.786
0.958
0.822
0.617
0.918
0.676
0.89
0.79
0.742
0.841
0.721
0.551
0.707
0.519
0.66
0.81
0.72
0.726
0.851
-0.924
0.679
0.877
0.766
0.527
0.724
0.854
0.461
0.769
0.587
0.77
0.70
0.768
0.863
-0.726
0.762
0.874
0.808
0.590
0.745
0.527
0.581
0.763
0.653
0.80
0.70
0.89
0.892
0.819
0.65
0.796
0.671
0.513
0.77
0.83
0.913
0.857
0.692
0.833
0.734
0.518
0.82
0.86
ρc
0.920
0.846
0.940
0.884
0.940
0.681
EFT1
0.859
0.737
0.85 0.90
0.977
0.955 0.93 0.98
0.925
0.547 0.87
0.95
EFT2
0.829
0.687
0.986
0.972
0.918
0.782
EFT3
Labels of variables: GMO = global market opportunities, GCT = global competitive threats, GMU = global market
uncertainty, REM = relational embeddedness, EFC = international marketing efficiency,
EFT = international marketing effectiveness
All indicators loaded significantly and substantively on their hypothesized factors (p
<.001). The discriminant validity of each construct was assessed by two methods. First, we
compared the square root of the average variance extracted (AVE) of each construct to all of its
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corresponding correlations, which are based on averages of items. Since each of the square roots
of AVE is greater than all corresponding correlations (see Table 4.2), all constructs exhibited
discriminant validity (Fornell and Larcker, 1981; White, Varadarajan, and Dacin, 2003).
Second, we compared each correlation with its respective standard error. Since each correlation
is less than 1 by an amount greater than twice its respective standard error, all constructs
revealed discriminant validity (Bagozzi and Warshaw, 1990). Based on the aforementioned
criteria, all scales used in this study proved to be valid and reliable. Table 4.2 presents the
descriptive statistics for latent constructs along with their correlations.
Table 4. 2
Descriptive Statistics: Mean, Standard Deviation, and Correlations
1. Relational embeddedness (REM)
REM
.76
GMO
GCT
GMU
CMA
EFC
EFT
.72
2. Global market opportunities (GMO)
.12
3. Global competitive threats (GCT)
.03
.22* .85
4. Global market uncertainty (GMU)
.08
-.06
5. Degree of cooperation (CMA)
.41** .16
.28*
.30** --
6. International marketing efficiency (EFC)
.10
-.12
-.16
7. International marketing effectiveness (EFT)
.30** .40**
.05
.01
Mean
4.81
5.14
5.24
4.26
3.36
4.55
4.32
Standard Deviation
0.71
1.24
1.59
1.28
1.59
1.19
1.41
** p < .01
* p < .05
.08
.42** .63
.06
.74
.41** .29** .86
Notes: Numbers shown in boldface denote the square root of the average variance extracted (for reflective constructs
only).
Before merging two national sub-samples for measurement validation, an assessment of
measurement invariance was conducted to ensure cross-cultural equivalence of the constructs
88
(Steenkamp and Baumgartner, 1998). Following the procedure suggested by Steenkamp and
Baumgartner (1998), configurational invariance and metric invariance must be achieved. While
the former refers to the cross-cultural equivalence in the factorial structure underlying a set of
observed measures, the latter implies equivalence in the scale intervals. Applying multiple group
confirmatory factor analysis, the results revealed full configurational invariance and metric
invariance after removing one item from the scale measuring relational embeddedness. This
item (i.e., the relationship that my firm has with my major marketing partner is very much like
being family) was removed due to the non-equivalent pattern of factor loadings across two
nations. Hence, merging the two national sub-samples is valid after deleting this item.
Results and discussion
Preliminary test of country and industry effects
We initially assessed the differences in the mean of the dependent variables—international
marketing efficiency and international marketing effectiveness—between two national subsamples and two industry sub-samples by using one-way ANOVA. The result revealed that
there is a significant difference in the mean of international marketing effectiveness (F-statistics
= 4.626 at p < .01), but not efficiency (F-statistics = 2.282 at p > .10) between Thai and the U.S.
exporters. However, there is no significant difference in international marketing effectiveness
(F-statistics = 0.215 at p > .10) and efficiency (F-statistics = 0.165 at p > .10) between the two
industries. This indicates that the international marketing effectiveness between the two
countries is significantly different from each other. Therefore, we included country as a dummy
variable in our analysis.
89
Model specification
Ordinary least square (OLS) regression analysis was used to test our hypotheses. Three
regression models in this study are:
CMA= β0 + β1 REM + β2 GMO + β3 GCT + β4 GMU + ε
EFC= β0 + β1 Αge + β2 IE + β3 CMA + ε
EFT= β0 + β1 Αge + β2 IE + β3 CMA + β4 Country + ε
Note: CMA = Degree of co-marketing alliances
REM = Relational Embeddedness
GMO = Global Market Opportunities
GCT = Global Competitive Threats
GMU = Global Mart Uncertainty
EFC = International Marketing Efficiency
EFT = International Marketing Effectiveness
IE = International Experience
Age = Firm Age
Country is the dummy variable where 0 represents U.S. firms and 1 represents Thai firms
Hypothesis testing and discussion
Since the results of measurement invariance have confirmed equality in the constructs across
these two countries and there is no difference in the mean of dependent variable across
industries, data were pooled for model estimation. Variance inflation factors (VIFs) and
conditional indices were used to diagnose potential multicollinearity problems. From the results
presented in Table 4.3, the maximum VIF obtained is 1.947, which is below the suggested cutoff
of 10.00 for a multiple regression (Mason and Perreault, 1991; Neter, et al., 1985). Moreover,
none of the condition indices for the regression model exceeds the acceptable value of 30.0
(Belsley, Kuh, and Welsch, 1980). Therefore, no severe multicollinearity problem is found here.
90
Table 4. 3
Results of Ordinary Least Square Regression Analysis a
Degree of cooperation in
co-marketing alliances
International
marketing efficiency
International
marketing effectiveness
Model 1
Model 2
Model 3
.393***
(.152)
(1.014)
--
--
Firm age
--
.104
(.095)
(1.846)
.125
(.090)
(1.873)
Firm international experience
--
.216
(.100)
(1.779)
.053
(.098)
(1.947)
.102
(.158)
(1.098)
--
--
Global competitive threats
.214**
(.157)
(1.074)
--
--
Global market uncertainty
.252***
(.152)
(1.019)
--
--
.138
(.069)
(1.050)
.343***
(.072)
(1.323)
--
--
.213*
(.235)
(1.380)
Adjusted R2
.251
.061
.179
F-statistics
7.967***
2.810**
5.512***
Variable
Control variables
Relational embeddedness
Other variables
Global market opportunities
Degree of cooperation in comarketing alliances
Country
a
The coefficients are standardized. Standard errors are in the first parentheses; variance
inflation factors are in the second parentheses.
* p < .10
** p < .05
*** p < .01
91
The results indicate that globalization effects explain a significant variance in the degree
of cooperation in co-marketing alliances (R2 = .251, p < .01). Furthermore, the variance in
international marketing effectiveness is significantly explained by this degree of cooperation (R2
= .179, p < .01). Regarding the effects of globalization on the degree of cooperation in comarketing alliances, the results from Model 1 indicate strong support for hypotheses 2 and 3.
Global competitive threats positively influence the degree of cooperation (β = .214, p < .05).
Similarly, global market uncertainty positively influences the degree of cooperation (β = .252 p <
.01).
We do not gain support for hypothesis 1. The coefficient is positive, but not statistically
significant (β = .102, p > .1). Given ample opportunities in the market but limited firm
capability, perhaps firms may not reduce their cooperation in alliances due to the bounded
rationality condition as hypothesized. Instead, they slightly increase their collaboration with
other firms in order to exploit the benefits of alliance participation and to expand their strategic
capabilities. This is contrary to our hypothesis. Our findings show that although increasing
global market opportunities are present, firms may not be able to capture them alone so they
collaborate with others. Firms might realize that the benefits from such collaboration may
outweigh the costs of safeguarding opportunistic behaviors under bounded rationality.
Therefore, cooperation in alliances may be perceived by firms as a viable option to gain
competitive advantage amid globalization.
In addition to these hypothesized relationships, relational embeddedness, which is the
control variable in Model 1, has a significant positive influence on the degree of cooperation.
This is consistent with the literature since prior studies (e.g., Gulati, 1998; Hansen, 1999; and
92
Uzzi, 1999) suggest that a high level of cooperation is present in alliances with a high degree of
relational embeddedness.
Models 2 and 3 were used to test hypothesis 4. We gain partial support for this
hypothesis since the degree of cooperation only significantly influences international marketing
effectiveness (β = .343, p < .01), but not efficiency (β = .138, p > .10). Furthermore, country has
an effect on international marketing effectiveness, but the coefficient is only significant at p <
.10 (β = .214). This result helps us explain that the cooperation in co-marketing alliances may
enable firms to enhance their effectiveness but not efficiency since higher costs may arise from
firms’ attempts to cooperate with one another; thus deteriorating their efficiency. This is
consistent with literature in transaction cost economics. The higher costs of transactions may
result from higher monitoring expenses incurred from safeguarding the behaviors of allying
partners. Table 4.4 summarizes the results of the hypothesis testing.
Table 4. 4
Results of Hypothesis Testing
Variables
Global market opportunities
Global competitive threats
Global market uncertainty
Degree of cooperation in comarketing alliances
Degree of cooperation
in co-marketing
alliances
Negative
(Not supported)
Positive
(Supported)
Positive
(Supported)
93
International
marketing
efficiency
International
marketing
effectiveness
Positive
(Not supported)
Positive
(Supported)
Contributions and future directions for research
Theoretical contributions
Alliances were recommended by many scholars as a means to achieve competitive advantage
and enhance firm performance during globalization. Yet, there is a scarcity of empirical research
investigating this issue. We address the question of whether forming alliances matters in
globalization. We extend both international business and marketing literature by linking the
globalization effects to firms’ marketing conduct (i.e., cooperation in co-marketing alliance) and
performance in international markets. Since past business research has paid limited attention to
this form of alliance, this research attempts to explore, in particular, issues related to firms’
cooperation in international marketing activities.
We found that globalization drives more cooperation among alliance partners. Global
competitive threats and global market uncertainty were found to have a strong influence on such
cooperation. From our findings, higher cooperation in international marketing activities (e.g.,
international market research, selecting overseas target markets, manufacturing the products to
be exported, and international sales promotion) enables firms to enhance their international
marketing effectiveness. Therefore, we can conclude that globalization stimulates alliance
cooperation and a higher degree of cooperation helps firms strengthen their international
performance.
It is believed that this research makes significant contributions to the literature on
globalization, alliances, and performance implications on allying firms. By applying two
complementary theories (i.e., transaction costs economics and market power perspective), we
explain the relationships among globalization effects, degree of cooperation in co-marketing
alliances and international marketing performance. Since these two theories have different
94
emphases, the application of these two theories helps us gain a more complete picture of 1) the
rationales behind the degree of cooperation in co-marketing alliance, and 2) the performance
implications of allying firms. While transaction cost economics focuses on the governance
structure that minimize a firm’s transaction costs, the market power perspective focuses on the
reduction of competition to gain market control. Based on these two theoretical perspectives, we
analyzed different relationships between each effect of globalization on the degree of
cooperation in co-marketing alliances in international marketing activities of firms. Therefore,
this paper extends the application of these two theoretical perspectives by applying them to the
unexplored phenomenon of globalization.
Managerial implications
To business practitioners, this study illustrates the significant role of co-marketing alliances in
enhancing the international marketing performance of firms in the context of globalization.
Managers can gain a better understanding of how globalization may affect their firms’
cooperation in alliances, which in turn affects performance. In today’s global economy, firms
are trying to gain competitive advantages that strengthen their market position and ensure their
long-term success. Therefore, managers need to understand how globalization may affect their
firms’ marketing conduct, such as their cooperation in alliances so that they can formulate
strategies to help them stay competitive in the global marketplace.
From our findings, firms should collaborate in international marketing activities such as
cooperatively selling their products in foreign markets, conducting international sales promotion
and advertising, providing overseas customer services, and developing new products for
international markets in order to achieve superior international marketing performance. Through
95
such cooperation, firms not only reduce potential competitors, but also expand their strategic
capabilities by sharing and combining their resources. This results in higher effectiveness.
However, allying firms need to control higher costs arising from working together so that
efficiency can be achieved. Clear job descriptions and responsibilities of each partner should
reduce redundancy, which ultimately lower total costs.
Since globalization presents both opportunities and threats to managers, they need to
recognize how such opportunities and threats may affect their firms’ marketing and business
practices. This study shows that global market threats (i.e., competitive threats and market
uncertainty) influence the degree of firms’ cooperation in co-marketing alliances. It also shows
that firms can enhance their international marketing effectiveness through such alliance
cooperation. In addition, our study confirms that globalization drives firms to increase
cooperation in alliances, and such cooperation, in turn, benefits their performance. Unless
managers are familiar with these issues, proper strategies regarding inter-firm collaboration
cannot be successfully implemented.
Limitations and directions for future research
Our study is among a very few empirical studies of globalization effects. Therefore, the results
of this study must be viewed with these limitations. The scales to measure globalization effects
were newly developed. The scope and domain of our formative measure for the degree of
cooperation in co-marketing alliances represents another measurement concern. Although these
scales were developed from a careful literature review, they are new, and thus need further
verifications and applications.
96
Several variables were not included in this study, but are worth incorporating in further
studies. The roles of trust and commitment in the co-marketing alliances should be investigated.
As stated in Dyer (1997), the transaction costs of the firms vary based on the choice of
safeguarding mechanisms used. For instance, higher commitment between exchange partners,
higher economies of scale and scope of exchange relationships, and higher inter-firm information
sharing can help lower transaction costs (Dyer, 1997). Since levels of trust and commitment
may affect the degree of cooperation and satisfaction of each partner, further studies could
investigate the relationships between the two and its effects on firms’ efficiency.
Other research avenues may include comparative studies of differences in the degree of
co-marketing alliances and their performance implications among firms from emerging
economies themselves. Although most emerging economies appear to possess similar
characteristics, they tend to differ in various ways (e.g., political regimes, levels of economic
development, and managerial styles). Moreover, empirical studies of firms in different emerging
markets are scarce. Thus, studies comparing firms from different emerging economies are worth
exploring in the future.
Conclusion
From both theoretical and practical perspectives, globalization is a complex phenomenon. Our
study is one of only a few empirical studies investigating the effects of globalization on firms.
We emphasize how globalization affects firms’ cooperation in international marketing activities,
and how such activities help them enhance their international marketing performance. Given
that globalization is multifaceted and only three of its dimensions were explored here, there
remain many issues to be addressed. Future studies should emphasize a search for theories to
97
explain the globalization phenomenon. It is hoped that our research inspires more studies on the
impact of globalization on business.
98
CHAPTER FIVE
CONCLUSION
This dissertation is comprised of three papers relating to the effects of globalization on firms.
The first paper advances prior knowledge on globalization and business by empirically
investigating how this phenomenon affects firm performance. The second and third papers
explore the role of firms’ cooperation in alliances in enhancing their performance amid
globalization by specifically focusing on co-marketing alliances and international marketing
performance of firms. A particular emphasis is paid to this type of alliance since superior
marketing is crucial for firms to build a sustainable source of unique competitive advantage.
Such advantage eventually enables firms to achieve long-run success in a hypercompetitive
terrain under globalization. While the second paper proposes a conceptual framework relating
globalization effects to alliance cooperation and firm performance, the last paper empirically
tests the proposed relationships in two distinct economies (i.e., Thailand and the U.S.).
Given that globalization is a complex phenomenon, there is a scarcity of empirical
research investigating its effects on businesses. The three aforementioned papers are among a
few empirical studies that explore the effects of globalization on firms. Hence, there are several
significant contributions of this dissertation. First, the effects of globalization on firms are
classified into two key dimensions—global market opportunities and global market threats—
based on an extensive review of scattered literature on the topic. Second, these major effects are
operationalized and empirically tested in two conceptual models to examine the relationships
among these effects, cooperation in alliances, and firm performance. Third, literature on
international business, strategic management, and marketing are integrated to address the effects
of globalization on firms’ marketing conduct and outcomes. Forth, two complementary
99
theories—transaction cost economics and market power perspectives—and literature on
environment-organization interfaces are integrated to explain the phenomenon.
The first paper in this dissertation discusses how globalization affects firms. It draws
from environment-organization literature. Building on this stream of research, macro
environment such as globalization represents a context in which organizational characteristics
and outputs are strongly shaped. For this reason, this paper attempts to demonstrate and address
how globalization influences firm performance. Although academic scholars have alluded to
various impacts of globalization, limited empirical studies have been conducted to investigate its
effects on firms. Therefore, the purpose of this paper is to classify and define such effects into
two major categories, i.e., global market opportunities and global market threats. Then, scales to
measure these effects were developed and empirically tested in two different economic contexts
(i.e., Thailand and the U.S.) to answer two research questions: 1) Does globalization affect firm
performance? and 2) Is the relationship between global market opportunities and performance
stronger than the relationship between global market threats and performance. The results of this
study provide considerable support for the notion that globalization can be both beneficial and
detrimental to business. Moreover, this study confirms that globalization is a universal
phenomenon in which firms, regardless of where they are located, are inevitably affected.
The second paper proposes a conceptual framework to investigate relationships among
globalization effects, degree of cooperation in co-marketing alliances, and international
marketing performance. This paper focuses on relationships between globalization effects and
alliances because past research often mentions that globalization drives more collaboration and
alliance participation, yet no empirical study establishes the link between these two. Comarketing alliances and international marketing performance are particularly emphasized here
100
since gaining a competitive edge in today’s globalized business environment requires firms to
excel in marketing activities. As in Webster’s (1994) words, “in the global markets of the 1990s
and beyond, superior marketing will be a more sustainable source of unique competitive
advantage than superior technology” (p.8). Thus, this paper explores how firms with
international marketing activities can enhance their performance in the global marketplace
through increased cooperation in co-marketing alliances. Building on market power perspective
and transaction cost economics, this paper proposes that increased global market threats,
including competitive threats and market uncertainty, will encourage more cooperation in
alliances while global market opportunities will not. While transaction costs economics
considers alliances as a strategy enabling firms to expand their strategic capabilities, market
power perspective regards alliances as a means to reduce competition and minimize uncertainty
evoked by globalization (Burgers, Hill, and Kim, 1993, Gulati and Singh, 1998; Dyer and Singh,
2002). Hence, a higher degree of cooperation in co-marketing alliances is then hypothesized to
enhance firms’ international marketing performance.
The last manuscript included in this dissertation presents an empirical study which tests
the hypothesized relationships put forth in the previous conceptual paper. It advances our
knowledge of globalization phenomenon by investigating the effects of globalization on degree
of co-marketing alliances and international marketing performance. The findings of this study
indicate that globalization drives more collaboration among firms, allowing them to better cope
with higher global competitive threats and market uncertainty. Such cooperation eventually
increases international marketing effectiveness of firms engaging in co-marketing alliances.
Whereas an increase in cooperation is influenced by higher global market threats (i.e., both
competitive threats and uncertainty), it is not affected by global market opportunities. The
101
absence of any effect of global market opportunities on alliance cooperation can be attributed to
the fact that ample opportunities in the markets may result in the lack of collaboration among
firms. Moreover, it is found that increased cooperation in co-marketing alliances helps firms
enhance international marketing effectiveness but not efficiency. Since higher expenses may
arise from such cooperative attempts, efficiency becomes difficult to realize. In sum, these
results validate globalization-alliance literature by showing that globalization actually drives
more cooperation among firms.
As discussed throughout the dissertation, globalization acts as a two-edged sword.
Managers should be prepared to cope with these diverse effects by capitalizing on global market
opportunities while carefully managing the inherent threats. Alliance participation and
cooperation presents a viable option for firms to navigate successfully in this new competitive
landscape. From both theoretical and practical perspectives, globalization is a complex
phenomenon. The three manuscripts included in this dissertation are among a few empirical
studies emphasizing the effects of globalization on firms. Given that globalization is
multifaceted and only a few key dimensions of its effects were explored here, many issues
remain to be addressed. It is hoped that this research will inspire more studies on the impact of
globalization on business and a search for theories to explain the phenomenon.
102
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APPENDICES
APPENDIX A
Non-response Bias
Table 1
Comparison of Early and Late Responses
Construct
F-Statistics:
Test of
Equality of
Variances
(P-value)
T-Statistics:
Equal
Variances
Assumed
(P-value)
T-Statistics:
Equal
Variances Not
Assumed
(P-value)
Wilcoxon W
Z-Statistics
(P-value)
Global market opportunities
0.563
(0.455)
0.710
(0.480)
0.685
(0.496)
-0.188
(0.851)
Global competitive threats
0.006
(0.936)
-1.426
(0.158)
-1.449
(0.152)
-1.369
(0.171)
Global market uncertainty
0.576
(0.450)
-0.597
(0.552)
-0.613
(0.542)
-0.398
(0.690)
Degree of co-marketing
alliances
0.785
(0.378)
-1.224
(0.225)
-1.185
(0.241)
-1.067
(0.286)
Relational embeddedness
0.646
(0.424)
0.118
(0.906)
0.116
(0.908)
-0.014
(0.989)
Table 2
Comparison of Two Randomly and Equally Split Responses
Construct
F-Statistics:
Test of
Equality of
Variances
(P-value)
T-Statistics:
Equal
Variances
Assumed
(P-value)
T-Statistics:
Equal
Variances Not
Assumed
(P-value)
Wilcoxon W
Z-Statistics
(P-value)
Global market opportunities
0.744
(0.391)
-1.114
(0.268)
-1.114
(0.269)
-0.886
(0.376)
Global competitive threats
1.172
(0.282)
-0.123
(0.903)
-0.123
(0.903)
-0.027
(0.979)
Global market uncertainty
0.096
(0.758)
-0.751
(0.455)
-0.751
(0.455)
-0.769
(0.442)
Degree of co-marketing
alliances
0.393
(0.533)
-0.542
(0.590)
-0.542
(0.590)
-0.425
(0.671)
Relational embeddedness
0.822
(0.367)
1.265
(0.209)
1.265
(0.209)
-1.172
(0.241)
119
APPENDIX B
Measures
Measures
Globalization Effects: New scale drawn from Burgers, Hill, and Kim (1993), Fawcett,
Calantone and Smith (1997), Fawcett and Closs (1993), and Zou and
Cavusgil (2002)
Global market opportunities:
GMO1 Globalization has increased my firm’s opportunities to develop customer markets
worldwide.
GMO2 Globalization has increased my firm’s opportunities for trade and investment.
GMO3 Globalization has increased my firm’s market potential.
GMO4 Globalization has increased my firm’s opportunities to expand the firm’s products and/or
markets.
GMO5 Globalization has facilitated my firm’s international market expansion.
GMO6 Globalization has made it easy for my firm to identify potential customers.
Global competitive threats:
GCT1 Globalization has increased the number of competitors my company is facing.
GCT2 Globalization has increased the level of competition my company is facing.
Global market uncertainty:
GMU1 Globalization has increased the difficulty in forecasting demand for the firm’s products.
GMU2 Markets have become increasingly uncertain due to globalization.
GMU3 Globalization has caused unpredictable changes in consumer purchasing patterns.
Scale items anchored by “strongly disagree” (1) to “Strongly Agree” (7).
Relational embeddedness: Scale adapted from Rindfleisch and Moorman (2001)
The relationship that my firm has with my major marketing partner…
REM1 … is something we are very committed to.
REM2 … is very important to my firm.
REM3 … is of very little significance to us.
REM4 … is something my firm intends to maintain definitely.
REM5 … is something my firm really cares about.
REM6 …deserves our firm’s maximum effort to maintain.
Scale items anchored by “strongly disagree” (1) to “strongly agree” (7).
121
Degree of cooperation in co-marketing alliances (New scale; formative)
Level of cooperation in (samples from a total of 14 items):
1. international market research
2. selecting overseas target markets
3. sharing production facilities for exported products
4. international sales promotion
5. selling in foreign markets
6. storing products to be exported
7. selecting and sharing wholesalers in foreign markets
Scale items anchored by “no cooperation 0%” (1) to “cooperation most of the time 80-100%” (7)
International Marketing Performance: Scale adapted from Vorhies and Morgan (2003)
International marketing effectiveness:
My company has very well achieved its goals in terms of….
EFT1 Growth in international market share
EFT2 International sales growth
EFT3 International market position
International marketing efficiency:
EFC1 My firm has achieved more sales revenue in foreign markets than the amount of marketing
and selling expenses allocated in those markets.
EFC2 My firm’s profits in foreign markets exceed the marketing and selling costs expended in
those markets.
EFC 3 My firm has achieved international sales and profit goals with minimum marketing costs.
Scale items anchored by “strongly disagree” (1) to “strongly agree” (7).
122
APPENDIX C
Cover Letter and Questionnaires
Date:
Dear:
We want to thank you for your interest in our research study. The study is part of Ms. Amonrat
Thoumrungroje’s dissertation work at International Business Institute, Washington State
University. The purpose of this research is to study firm’s international business practices in the
globalization era. We expect the findings of this research to have significant implications to
managers, and therefore we would like to make them available to you. We have provided a
space below for you to indicate whether you would like to receive an executive summary of the
results. We will be happy to provide you with the information.
In addition, all responses will be held strictly confidential and no information which could
reveal your firm’s or your own identity will be used in any data reporting, nor will it be
shared in its individual form with any outside party without your expressed permission to
do so.
Thank you very much for your time. We hope that you agree with us about the potential value
of this project. Please help us complete the survey and return it to us in the postage-paid return
envelope as soon as possible. If you think that someone else in your firm is more informed to
participate and complete the survey, please forward the enclosed questionnaire to the
appropriate person in your firm. Should you have any concerns or questions related to this
survey, please do not hesitate to contact Dr. Patriya Tansuhaj or Amonrat Thoumrungroje at
509-335-2180 or email: [email protected], The International Business Institute, Washington State
University, PO Box 4815, Pullman, WA 99164-4815.
Sincerely,
Sincerely,
Patriya Tansuhaj,
Director and Professor
International Business Institute
Amonrat Thoumrungroje
Ph.D. Candidate
Summary data desired?
Yes
No
Please enclose a business card with your response if you would like a copy of the results.
124
Questionnaire
Ph. D. Dissertation Research Project on International Business Practices
* Thank you for taking time to complete this questionnaire. We assure you of complete
confidentiality on all of your responses.
International Business Management
School of Management
Assumption University Thailand
International Business Institute
College of Business and Economics
Washington State University
125
Ph. D. Dissertation Research Project
Thank you for taking the time to participate in the study. This questionnaire should take about
10 minutes to complete. All responses are strictly confidential and no information which could
reveal your firm’s or your own identity will be used in any data reporting, nor will it be shared
in its individual form with any outside party without your expressed permission to do so.
Q1. How is your firm’s business activity divided between domestic and foreign markets?
Domestic market ____________%
Foreign markets ____________%
Total
100%
Q2. Please list the firm’s major foreign markets (countries)
1) ______________________________________________________________
2) ______________________________________________________________
3) ______________________________________________________________
4) ______________________________________________________________
5) ______________________________________________________________
Q3. How many years has your firm been doing business overseas?
Less than 1 year
1-6 years
7-12 years
13-18 years
19-24 years
25- 32 years
Over 32 years
126
In the following questions, GLOBALIZATION is defined as the process of increasing
social/cultural inter-connectedness, political interdependence, and economic and market
integrations.
Q4. To what extent do you agree/disagree with the following statements?
Strongly Disagree
Disagree
1)
Globalization has increased my firm’s
opportunities to develop customer
markets worldwide.
Some- Neutral
what
Disagree
Somewhat
Agree
Agree
Strongly
Agree
1
2
3
4
5
6
7
1
2
3
4
5
6
7
1
2
3
4
5
6
7
1
2
3
4
5
6
7
Globalization has increased my firm’s
opportunities to expand the firm’s
products and/or markets.
1
2
3
4
5
6
7
6)
Globalization has facilitated my
firm’s international market expansion.
1
2
3
4
5
6
7
7)
Globalization has made it easy for my
firm to identify potential customers.
1
2
3
4
5
6
7
2)
Globalization has increased my firm’s
opportunities for trade and
investment.
3)
Globalization has increased my firm’s
market potential.
4)
5)
Globalization has increased my firm’s
opportunities to access raw materials
and labor worldwide.
127
Q5. Please indicate the extent to which you agree with the following statements regarding
the effects globalization on your business.
Strongly Disagree
Disagree
1)
Somewhat
Disagree
Neutral
Somewhat
Agree
Agree
Strongly
Agree
Globalization has increased the
number of competitors my
company is facing.
1
2
3
4
5
6
7
Globalization has increased the
level of competition my company
is facing.
1
2
3
4
5
6
7
Globalization has made it difficult
for my firm to out-compete the
competitors.
1
2
3
4
5
6
7
Globalization has increased the
difficulty in forecasting demand
for the firm’s products.
1
2
3
4
5
6
7
5)
Markets have become increasingly
uncertain due to globalization.
1
2
3
4
5
6
7
6)
Globalization has caused
unpredictable changes in consumer
purchasing patterns.
1
2
3
4
5
6
7
7)
Globalization has increased the
costs of my business operations
1
2
3
4
5
6
7
8)
Globalization adds complexity to
my business operations
1
2
3
4
5
6
7
2)
3)
4)
128
Q6. From 1997 to 2003, the PERCENTAGE CHANGE in the NUMBER of my firm’s….
1-50%
0%
1-50%
51-100%
Increased
by
more than
100%
2
3
4
5
6
7
1
2
3
4
5
6
7
foreign competitors
1
2
3
4
5
6
7
5)
domestic customers
1
2
3
4
5
6
7
6)
foreign customers
1
2
3
4
5
6
7
7)
domestic financial sources
1
2
3
4
5
6
7
8)
foreign financial sources
1
2
3
4
5
6
7
Reduced
by
100%
1)
domestic suppliers
2)
foreign suppliers
1
3)
domestic competitors
4)
1
Reduced
by
51-99%
2
Reduced Remained Increased
by
by
Unchanged
3
4
5
Increased
by
6
Q7. Does your firm cooperate with other firms in at least one marketing activity (e.g.,
selling, advertising, distribution, production, R&D, pricing, product/service
development, warehousing, branding, etc.)?
Yes
No (Skip to Question # 13)
Q8. Does your firm have any equity investment in this marketing alliance?
No
Yes. If yes, approximately __________%
129
7
From questions 8 to 10, MARKETING ALLIANCE refers to the collaboration between
two or more firms in performing at least one marketing activity together.
Q9. Both my firm and other firms in the marketing alliance……
Strongly Disagree
Disagree
1)
Somewhat
Disagree
Neutral
Somewhat
Agree
Agree
Strongly
Agree
contribute different resources to
the relationship that help us
achieve mutual goals.
1
2
3
4
5
6
7
2)
have complementary strengths that
are useful to our relationship.
1
2
3
4
5
6
7
3)
have separate abilities that, when
combined together, enable us to
achieve goals beyond our
individual reach.
1
2
3
4
5
6
7
Q10. The relationship that my firm has with my major marketing partner…
Strongly Disagree
Disagree
Somewhat
Disagree
Neutral
3
4
Somewhat
Agree
Agree
Strongly
Agree
5
6
7
1)
…is something we are very
committed to.
1
2
2)
...is very important to my firm.
1
2
3
4
5
6
7
3)
…is of very little significance to us.
1
2
3
4
5
6
7
4)
…is something my firm intends to
maintain definitely.
1
2
3
4
5
6
7
5)
…is very much like being family.
1
2
3
4
5
6
7
6)
…is something my firm really cares
about.
1
2
3
4
5
6
7
7)
…deserves our firm’s maximum
effort to maintain.
1
2
3
4
5
6
7
130
Q11. Please indicate the level of cooperation between your company and the marketing
partners regarding the following activities
Absolutely
CoNo
operate
Cooperation
Cooperate
0%
1-15%
16-30%
Selecting overseas target markets
1
2
3)
New product development for
international markets
1
4)
Sharing production facilities for
exported products
5)
1)
International market research
2)
1
3
CoCooperation
operate
most of the
Times
31-50% 51-65% 66-80%
80-100%
4
5
6
3
4
5
6
7
2
3
4
5
6
7
1
2
3
4
5
6
7
Research and development
1
2
3
4
5
6
7
6)
Manufacturing the products to be
exported
1
2
3
4
5
6
7
7)
International sales promotion
1
2
3
4
5
6
7
8)
Selling in foreign markets
1
2
3
4
5
6
7
9)
International advertising
1
2
3
4
5
6
7
10)
Providing international customer
services
1
2
3
4
5
6
7
11)
Storing products to be exported
1
2
3
4
5
6
7
12)
Sharing containers for products to be
exported
1
2
3
4
5
6
7
13)
Selecting and sharing wholesalers in
foreign markets
1
2
3
4
5
6
7
14)
Selecting and sharing retailers in
foreign markets
1
2
3
4
5
6
7
131
2
Moderate CoCooperate
operation
7
Q12. My company has very well achieved its goals in terms of….
Strongly Disagree
Disagree
1)
Growth in international market
share
1
2
2)
International sales growth
1
3)
International market position
1
Some- Neutral
what
Disagree
Somewhat
Agree
Agree
Strongly
Agree
5
6
7
3
4
2
3
4
5
6
7
2
3
4
5
6
7
Q13. Please indicate the extent to which you agree with the following statements regarding
marketing efficiency of your firm in foreign markets.
1)
My firm has achieved international sales
growth with less resources than
expected.
2) My firm has achieved more sales revenue
in foreign markets than the amount of
marketing and selling expenses allocated
in those markets.
3)
My firm’s profits in foreign markets
exceed the marketing and selling costs
expended in those markets.
4)
My firm has achieved international sales
and profit goals with minimum
marketing costs.
5)
My firm is efficient in utilizing
marketing and selling resources
allocated to foreign markets in
generating more revenues in those
markets.
Strongly Disagree Some- Neutral
Disagree
what
Disagree
Somewhat
Agree
Agree
Strongly
Agree
1
2
3
4
5
6
7
1
2
3
4
5
6
7
1
2
3
4
5
6
7
1
2
3
4
5
6
7
1
2
3
4
5
6
7
132
Q14. Please choose the number that most accurately describes the general performance of
operations of your firm’s:
1)
Marketing strategy
2)
Very Unsatis- Somewhat
UnsatisUnsatis- factory
factory
factory
Neutral
Somewhat
Satisfactory
Satisfactory
5
6
Very
Satisfactory
1
2
3
4
7
Distribution strategy
1
2
3
4
5
6
7
3)
Pricing strategy
1
2
3
4
5
6
7
4)
Promotion strategy
1
2
3
4
5
6
7
5)
Maintaining contacts with
customers
1
2
3
4
5
6
7
6)
Customer service
1
2
3
4
5
6
7
7)
Return of investment
1
2
3
4
5
6
7
8)
Sales goals
1
2
3
4
5
6
7
9)
Profit goals
1
2
3
4
5
6
7
10)
Growth goals
1
2
3
4
5
6
7
Q15. Please choose the range of percentages that most accurately describes the firm’s
domestic and international performance.
1) Percentage of total profit to total sales
(Total profit divided by total sales)
Percentage per year
Under
5%
510%
11 20%
21 30%
31 40%
41 50%
Above
50%
Under
5%
510%
11 20%
21 30%
31 40%
41 50%
Above
50%
3) Percentage of sales in foreign markets to total
Under
sale
5%
(International sales divided by total sales)
510%
11 20%
21 30%
31 40%
41 50%
Above
50%
4) Percentage of profit in foreign markets to total
Under
profit
5%
(International profit divided by total profit)
510%
11 20%
21 30%
31 40%
41 50%
Above
50%
510%
11 20%
21 30%
31 40%
41 50%
Above
50%
2) Percentage of total profit to total assets
(Total profit divided by total assets)
5) Percentage of sales growth in foreign markets
Under
5%
133
Q16. How many percent of the firm’s expenditure is used for research and development?
Less than 5%
15 – 19%
30% and above
5 – 9%
20 – 24%
10 – 14%
25 – 29%
Q17. Please indicate which ownership best describes your firm’s organization by selecting
only one of the choices below.
Sole Proprietorship
Partnership
Corporation
Cooperative
Other (please specify) ______________________________________
Q18. What are the main products/services of your firm?
1)
_____________________________________________________________
2)
_____________________________________________________________
3)
_____________________________________________________________
4)
_____________________________________________________________
5)
_____________________________________________________________
Q19. How many years has your firm been established?
Less than 1 year
1-6 years
7-12 years
13-18 years
19-24 years
25- 32 years
Over 32 years
Q20. The number of full-time employees of your firm is…………….
1-9
10-19
20-49
50-99
100-149
150-199
200 and over
Q21. Please indicate the percentage of foreign ownership of your firm:
0%
31-45 %
More than 75%
1-15 %
46-60 %
16-30 %
61- 75 %
Q22. How long have you worked for your firm? ____________ years
Q23. What is your position?_____________________________________________________
Thank you for your participation. Please return this completed questionnaire in the
provided envelope. If you would like a summary of the results of this survey, please
include your business card with this questionnaire and I will be happy to mail it to you
upon completion of the study.
134
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